Interest Coverage Ratio CalculatorFree online financial calculator — instant results, no sign-up
Measure how many times operating earnings cover interest expense.
Estimates only, based on the inputs and assumptions shown. This is not financial, investment, tax, or legal advice. Prices, rates and local rules may change; crypto scenarios do not predict returns. Confirm important decisions with a qualified professional.
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About the Interest Coverage Ratio Calculator
The Interest Coverage Ratio Calculator measures how many times a business’s earnings before interest and taxes (EBIT) cover its interest expense for the same period. It divides operating earnings by interest expense to help assess the earnings cushion available for interest payments. With EBIT of $900,000 and interest expense of $150,000, the interest coverage ratio is 6.
- Earnings before interest and taxes ($)
- The business’s earnings before deducting interest and income taxes for the selected reporting period, entered in dollars.
- Interest expense ($)
- The business’s interest expense for the same reporting period as EBIT, entered in dollars.
Formula and method
ICR = EBIT / I; with the default inputs, ICR = $900,000 / $150,000 = 6.
- ICRInterest coverage ratio, a unitless measure commonly expressed as times coverage.
- EBITEarnings before interest and taxes for the reporting period, in dollars.
- IInterest expense for the same reporting period, in dollars.
Use EBIT and interest expense from the same reporting period and in the same currency units. Divide EBIT by positive interest expense to obtain the number of times earnings cover interest. The default calculation divides 900000 by 150000 and returns 6, or 6 times coverage.
Worked example
These are the calculator's starting values and the results it actually produces for them.
Inputs
- Earnings before interest and taxes900000 $
- Interest expense150000 $
Results
- Interest coverage ratio6
How to use the Interest Coverage Ratio Calculator
- 1Choose a reporting period and obtain the business’s EBIT and interest expense for that period.
- 2Enter EBIT in “Earnings before interest and taxes ($)”; the default is 900000.
- 3Enter a positive expense amount in “Interest expense ($)”; the default is 150000.
- 4Calculate the ratio by dividing EBIT by interest expense.
- 5Read the interest coverage ratio and compare it with the business’s prior periods, industry peers, and any applicable lender requirements.
Reading your result
The interest coverage ratio output shows how many times EBIT covers interest expense. The default output of 6 means $900,000 of EBIT is six times $150,000 of interest expense; it is not a percentage or a dollar amount. A ratio above 1 indicates EBIT exceeds interest expense, a ratio of 1 indicates they are equal, and a positive ratio below 1 indicates EBIT is insufficient to cover interest expense. With positive interest expense, a negative ratio indicates negative EBIT. Higher coverage generally signals a larger earnings cushion, but acceptable levels depend on industry, earnings stability, and lender requirements.
Limitations
This calculation assumes comparable reporting periods, consistent accounting definitions, and positive interest expense. Zero interest expense makes the ratio undefined, while a negative interest expense figure is not suitable for the usual coverage interpretation. EBIT is an accounting earnings measure, not cash available for payment, and may differ from reported operating income. The ratio does not measure coverage of principal repayments, capital expenditures, or other cash obligations. One-time earnings items can distort it, and loan covenants may require a different definition of earnings or interest expense.
Common questions
Why do the default inputs produce an interest coverage ratio of 6?+
Dividing EBIT of $900,000 by interest expense of $150,000 gives 6. This means earnings before interest and taxes cover the period’s interest expense six times.
Should I enter EBIT, EBITDA, or net income?+
Enter EBIT. EBITDA excludes depreciation and amortization, while net income generally reflects interest and income taxes; substituting either would change the measure and would not produce this calculator’s EBIT-based interest coverage ratio.
What if the business has no interest expense?+
With zero interest expense, division by zero prevents a finite interest coverage ratio. Treat the ratio as undefined or not applicable rather than interpreting it as zero coverage.
Does a ratio of 6 mean the business can repay all its debt?+
No. It indicates that EBIT covers interest expense six times for the selected period, but it does not assess principal repayments or actual cash availability. Review cash flow, debt maturities, and other obligations separately.
Does the calculator save my information?+
Calculations run in your browser. While signed in, inputs and results are automatically recorded in account history; saving a result creates a separate saved record.
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Results are estimates for informational purposes and are not financial, medical or legal advice.