Glossary term
Interest coverage ratio
Interest coverage ratio compares earnings before interest and taxes with interest expense.
Plain meaning
What interest coverage means
Interest coverage ratio is commonly calculated as EBIT divided by interest expense. It estimates how many times entered earnings cover entered interest expense.
Formula role
How OpenBook uses it
OpenBook's coverage calculator uses entered EBIT and interest expense. If interest expense is zero, the ratio is unavailable because the formula denominator is zero.
Common boundary
Why coverage definitions vary
Lender and covenant definitions may use adjusted EBITDA, fixed charges, debt-service coverage, or other definitions. OpenBook's calculation is a simplified formula unless the calculator states otherwise.