**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.