Interest coverage calculator
Interest coverage is a leverage and coverage metric, calculated as EBIT ÷ Interest expense. Common covenant.
- Formula
- EBIT ÷ Interest expense
Interest coverage ratio
Interest coverage = EBIT ÷ Interest expense$
$
Interest coverage
6.11×
How it’s worked out
- 1EBIT ÷ interest expense$1,100,000 ÷ $180,0006.11×
Runs in your browser; nothing you type is sent anywhere. Amounts in US dollars.
How to read it
Interest coverage asks how many times over operating profit could pay the period's interest.
It is a lender's measure: the margin of safety before a fall in profit makes the interest unpayable.
Common mistakes
- Using EBITDA when the covenant says EBIT.
- Leaving out interest on finance leases.
Questions
- What is a good interest coverage ratio?
- Lenders typically want at least 2× to 3×. Below 1.5× is a warning; below 1× the company cannot cover its interest from operations.
- What is another name for it?
- Times interest earned (TIE).
Read it with
The metrics read alongside this one, and the terms it is confused with.
- DSCR calculatorDSCR is a leverage and coverage metric, calculated as Cash available for debt service ÷ Debt service (interest + scheduled principal).Calculator
- Debt-to-equity calculatorDebt-to-equity is a leverage and coverage metric, calculated as Total debt ÷ Total equity.Calculator
- EBIT calculatorEBIT is a profitability metric, calculated as Net income + Interest expense + Income tax expense.Calculator
- Interest coverageInterest coverage is a leverage and coverage metric, calculated as EBIT ÷ Interest expense.Term
The formula is the one the glossary states, and the arithmetic is unit-tested. A ratio with nothing to divide by shows a dash — undefined is not zero. General information, not financial advice.