What do you mean by interest coverage ratio? What does it indicate?



What do you mean by interest coverage ratio? What does it indicate?..

Answer / Manoj Kumar Raman

Interest Coverage Ratio, also known as Times Interest Earned Ratio, measures a company's ability to meet its interest payments. It indicates how many times the company's profit before interest and taxes (EBIT) can cover its annual interest expense. The formula is: Interest Coverage Ratio = EBIT / Annual Interest Expense.

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