Formula To Calculate Interest Coverage Ratio :

This is a debt and profitability ratio used to determine how easily a company can pay interest on its outstanding debt.

To calculate the Interest Coverage Ratio(financial), use the following formula

Interest Coverage Ratio = EBIT / Interest Expense

Where

EBIT = earnings before interest and taxes.

Example :

Company XYZ has an EBIT of $1,000 and interest expense of $1,000.

= (1000/1000) = 1

Company XYZ interest coverage ratio is 1.