Finance

Interest Coverage Ratio Calculator

Find how easily earnings cover interest.

Calculated Output

Interest coverage (x) 5

Formula: coverage = EBIT ÷ interest expense

Step-by-Step Breakdown

1. Values used:

2. EBIT (operating income) = 500,000 $

3. Interest expense = 100,000 $

5. Interest coverage = EBIT (operating income) / Interest expense = 500,000 / 100,000 = 5x

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The math behind it

interest coverage = EBIT ÷ interest expense. Higher is safer.

$500k ÷ $100k → 5x.

Danger zone?

Below ~1.5x suggests trouble servicing debt.