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How is an interest coverage ratio is calculated?

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Question ajoutée par Abdullah Mahhaden, CFA, CPA , Assurance Manager , Grant Thornton
Date de publication: 2013/06/15
Habibullah Usman
par Habibullah Usman , General Manager , Venkys Italy Marmo S.r.l.

Interest coverage ratio is used to determine how easily a company can pay interest on outstanding debt.
The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period.
The lower the ratio, the more the company is burdened by debt expense.
A ratio under1 means that the company is having problems generating enough cash flow to pay its interest expenses.
Ideally you want the ratio to be over1.5 times.

md.rashed iqbal mollick
par md.rashed iqbal mollick , Reseach Assistant , Emerging credit rating limited

interest coverage ratio can be calculated =earning before interest and tax divided by interest expenses

sana imam
par sana imam , manager , Union Bank of India

ISCR= earning before interest and tax divided by interest expenses

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