Interest coverage ratio calculator
A ratio lenders check before extending credit: how many times operating profit covers the interest due.
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How to use it
- Enter earnings before interest and taxes (ebit) and interest expense.
- The result appears straight away and updates as you edit.
- Copy the result, or copy a link that keeps the same values to share it.
How it is calculated
Interest coverage = EBIT ÷ interest expense, where EBIT is earnings before interest and taxes.
Example
Inputs: Earnings before interest and taxes (EBIT) = 500,000, Interest expense = 100,000. Result: Interest coverage ratio: 5 times; Reading: Operating profit covers interest; Profit left after interest: 400,000.00.
Limits and caveats
- Based on one period profit; volatile earnings need a multi-year average.
- Covers interest only, not principal repayments.
Questions about this tool
What does a ratio of 5 mean?
Operating profit is 5 times the interest due, so the company can pay it with room to spare.
What does a ratio below 1 mean?
Operating profit is not enough to pay interest, a clear sign of financial strain.
Should I use EBITDA instead of EBIT?
Some lenders use EBITDA, which gives a higher ratio, so check which definition your loan terms use.