How does the Interest Coverage Ratio work?

Get EBIT (Earnings Before Interest and Taxes) from the income statement Then: Get total interest expense for the period Then: Interest coverage = EBIT / Interest expense.

Can you give an example of how to use the Interest Coverage Ratio?

Example: Input EBIT £200k · Interest £40k gives a result of Coverage ratio = 5.0x (Earns 5 times what it needs to service debt).

Is the Interest Coverage Ratio free to use?

Yes — completely free with no registration, download, or subscription required. All calculations happen instantly in your browser.

How accurate is the Interest Coverage Ratio?

Our Interest Coverage Ratio uses verified mathematical formulas and is accurate to multiple decimal places. Results are calculated in real-time using the same methods used by professionals.

Can I use this Interest Coverage Ratio for real financial decisions?

This calculator is for educational and estimation purposes. For major financial decisions — especially mortgages, investments, or tax planning — always consult a qualified financial adviser.

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Interest Coverage Ratio

EBIT

Earnings before interest & tax

Interest expense

The interest coverage ratio measures how comfortably a company can pay interest on its debt from operating earnings. Interest coverage = EBIT / Interest expense. A ratio below 1.5 is a warning sign.

Ratio	Assessment
> 5x	Excellent — very comfortable
3–5x	Good — manageable debt level
1.5–3x	Adequate — tight but viable
< 1.5x	Danger — may struggle to service debt
< 1.0x	Crisis — cannot cover interest from operations

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Did You Know?

Credit rating agencies (Moody's, S&P) use interest coverage as a primary input when rating corporate bonds. Falling below 2x often triggers a credit rating downgrade.

References

›Interest coverage ratio — Investopedia

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