Interest Coverage Ratio Solution

STEP 0: Pre-Calculation Summary
Formula Used
Interest Coverage Ratio = Earnings Before Interest and Taxes/Interest Expense
ICR = EBIT/Int
This formula uses 3 Variables
Variables Used
Interest Coverage Ratio - Interest Coverage Ratio assesses a company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT).
Earnings Before Interest and Taxes - Earnings Before Interest and Taxes is a measure of a firm's profit that includes all expenses except interest and income tax expenses.
Interest Expense - Interest expense is a non-operating expense shown on the income statement.
STEP 1: Convert Input(s) to Base Unit
Earnings Before Interest and Taxes: 450000 --> No Conversion Required
Interest Expense: 100 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
ICR = EBIT/Int --> 450000/100
Evaluating ... ...
ICR = 4500
STEP 3: Convert Result to Output's Unit
4500 --> No Conversion Required
FINAL ANSWER
4500 <-- Interest Coverage Ratio
(Calculation completed in 00.004 seconds)

Credits

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Created by Vishnu K
BMS College of Engineering (BMSCE), Bangalore
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Verified by Kashish Arora
Satyawati College (DU), New Delhi
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Interest Coverage Ratio
​ LaTeX ​ Go Interest Coverage Ratio = Earnings Before Interest and Taxes/Interest Expense

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Free Cash Flow
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Debt to Assets Ratio
​ LaTeX ​ Go Debt to Assets Ratio = Total Liabilities/Total Assets

Interest Coverage Ratio Formula

​LaTeX ​Go
Interest Coverage Ratio = Earnings Before Interest and Taxes/Interest Expense
ICR = EBIT/Int

What is Interest Coverage Ratio?

The Interest Coverage Ratio, also known as the times interest earned (TIE) ratio, is a solvency ratio that measures a company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT). In other words, it indicates how many times a company can pay its interest charges on outstanding debt using its operating income.
A higher Interest Coverage Ratio indicates that a company is more capable of servicing its debt obligations, as it signifies that the company generates sufficient operating income to cover its interest expenses comfortably. Conversely, a lower ratio suggests that the company may have difficulty meeting its interest payments and could be at risk of defaulting on its debt.

How to Calculate Interest Coverage Ratio?

Interest Coverage Ratio calculator uses Interest Coverage Ratio = Earnings Before Interest and Taxes/Interest Expense to calculate the Interest Coverage Ratio, The Interest Coverage Ratio formula is defined as a solvency ratio that measures a company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT). Interest Coverage Ratio is denoted by ICR symbol.

How to calculate Interest Coverage Ratio using this online calculator? To use this online calculator for Interest Coverage Ratio, enter Earnings Before Interest and Taxes (EBIT) & Interest Expense (Int) and hit the calculate button. Here is how the Interest Coverage Ratio calculation can be explained with given input values -> 4500 = 450000/100.

FAQ

What is Interest Coverage Ratio?
The Interest Coverage Ratio formula is defined as a solvency ratio that measures a company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT) and is represented as ICR = EBIT/Int or Interest Coverage Ratio = Earnings Before Interest and Taxes/Interest Expense. Earnings Before Interest and Taxes is a measure of a firm's profit that includes all expenses except interest and income tax expenses & Interest expense is a non-operating expense shown on the income statement.
How to calculate Interest Coverage Ratio?
The Interest Coverage Ratio formula is defined as a solvency ratio that measures a company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT) is calculated using Interest Coverage Ratio = Earnings Before Interest and Taxes/Interest Expense. To calculate Interest Coverage Ratio, you need Earnings Before Interest and Taxes (EBIT) & Interest Expense (Int). With our tool, you need to enter the respective value for Earnings Before Interest and Taxes & Interest Expense and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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