EBIT vs interest obligations. The Interest Coverage Ratio Calculator takes operating profit (ebit), interest expense for the period and returns interest coverage plus profit fall that would leave interest just covered. Results update as you type, and the formula is shown under the result so you can repeat it in your own spreadsheet.
Financial ratios are only useful in comparison: against last year, against a competitor, or against the benchmark for your industry. Take the figures from the same set of accounts, note whether they are yearly or monthly, and read each ratio alongside the others in its family. Use the worked example below to check the maths against your own figures.
How the Interest Coverage Ratio Calculator works
How many times operating profit covers the interest bill. Below 1.5 lenders see distress; above 3 is comfortable.
Worked example
With the example values (operating profit (ebit) of $250,000, interest expense for the period of $50,000), the interest coverage is 5.00x; profit fall that would leave interest just covered 80%. Change any figure above and the result updates immediately; use Copy results to paste the summary into a note or email.
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Frequently Asked Questions
How is interest coverage calculated?
interest coverage = EBIT ÷ interest expense.
Which figures do I need?
Operating profit (ebit), interest expense for the period. Take them from the same period and the same set of accounts or reports so the ratio is consistent, and check the example values as a guide to the units expected.
What is a good value for this ratio?
Benchmarks differ by industry, size and business model, so compare with companies like yours and with your own history. A ratio moving in the wrong direction for several periods matters more than any single number.
