What is it?
The interest coverage ratio may be calculated by dividing a company's earnings before interest and taxes (EBIT) during a given period by the company's interest payments due within the same period.
Who is interested?
The financial community and investors.
What does it tell me?
The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest on its outstanding debt.
The Interest coverage ratio is also called “times interest earned.” Lenders, investors, and creditors often use this formula to determine a company's riskiness relative to its current debt or for future borrowing.