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Interest Coverage Ratio Formula

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Interest Coverage Ratio assesses a company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT). Check FAQs

ICR = \frac{EBIT}{Int}

ICR - Interest Coverage Ratio?EBIT - Earnings Before Interest and Taxes?Int - Interest Expense?

Interest Coverage Ratio Example

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Here is how the Interest Coverage Ratio equation looks like with Values.

Here is how the Interest Coverage Ratio equation looks like with Units.

Here is how the Interest Coverage Ratio equation looks like.

4500 = \frac{450000}{100}

4500 = \frac{450000}{100}

4500 = \frac{450000}{100}

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Interest Coverage Ratio Solution

Follow our step by step solution on how to calculate Interest Coverage Ratio?

FIRST Step Consider the formula

ICR = \frac{EBIT}{Int}

Next Step Substitute values of Variables

∴

ICR = \frac{450000}{100}

Next Step Prepare to Evaluate

∴

ICR = \frac{450000}{100}

LAST Step Evaluate

∴

ICR = 4500

Interest Coverage Ratio Formula Elements

Variables

Interest Coverage Ratio

Interest Coverage Ratio assesses a company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT).

Symbol: ICR

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Interest Coverage Ratio

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.

Symbol: EBIT

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Earnings Before Interest and Taxes

Interest Expense

Interest expense is a non-operating expense shown on the income statement.

Symbol: Int

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Interest Expense

Other formulas in Coverage Ratios category

Go Free Cash Flow

FCF = CFO - CAPEX

Go Free Cash Flow to Firm

FCFF = CFO + (Int \cdot (1 - tax)) - CAPEX

Go Debt to Assets Ratio

DA = \frac{TL}{TA}

Go Debt to Equity Ratio

R D/E = \frac{TL}{TSE} \cdot 100

How to Evaluate Interest Coverage Ratio?

Interest Coverage Ratio evaluator uses Interest Coverage Ratio = Earnings Before Interest and Taxes/Interest Expense to evaluate 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 evaluate Interest Coverage Ratio using this online evaluator? To use this online evaluator for Interest Coverage Ratio, enter Earnings Before Interest and Taxes (EBIT) & Interest Expense (Int) and hit the calculate button.

FAQs on Interest Coverage Ratio

What is the formula to find Interest Coverage Ratio?

The formula of Interest Coverage Ratio is expressed as Interest Coverage Ratio = Earnings Before Interest and Taxes/Interest Expense. Here is an example- 4500 = 450000/100.

How to calculate Interest Coverage Ratio?

With Earnings Before Interest and Taxes (EBIT) & Interest Expense (Int) we can find Interest Coverage Ratio using the formula - Interest Coverage Ratio = Earnings Before Interest and Taxes/Interest Expense.

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Interest Coverage Ratio Formula

Interest Coverage Ratio Example

Interest Coverage Ratio Solution

Interest Coverage Ratio Formula Elements

Other formulas in Coverage Ratios category

How to Evaluate Interest Coverage Ratio?

FAQs on Interest Coverage Ratio

Variable Name