Interest Coverage Ratio Calculator

Formula

To calculate the Interest Coverage Ratio (ICR):

\[ ICR = \frac{EBIT}{IE} \]

Where:

\(ICR\) is the interest coverage ratio
\(EBIT\) is the earnings before interest and taxes
\(IE\) is the interest expense

What is Interest Coverage Ratio?

The interest coverage ratio is a financial metric used to determine how easily a company can pay interest on its outstanding debt. It is calculated by dividing the company's EBIT by its interest expense[^1^][^2^].

Example Calculation 1

Let's assume the following values:

EBIT = 100,000
Interest Expense = 20,000

Using the formula:

\[ ICR = \frac{100,000}{20,000} = 5.00 \]

The interest coverage ratio is 5.00.

Example Calculation 2

Let's assume the following values:

EBIT = 150,000
Interest Expense = 30,000

Using the formula:

\[ ICR = \frac{150,000}{30,000} = 5.00 \]

The interest coverage ratio is 5.00.