Interest Coverage Ratio

[Jessica]

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.

[Monty]

The number of times that fixed interest charges were earned. It indicates the margin of safety of interest on fixed debt. The times-interest-earned ratio is calculated using net income before and after income taxes; and the credits of interest charged to construction being treated as other income. The interest charges include interest on long-term debt, interest on debt of associated companies, and other interest expenses.