interest coverage ratio


A calculation of a company's ability to meet its interest payments on outstanding debt. Interest coverage ratio is equal to earnings before interest and taxes for a time period, often one year, divided by interest expenses for the same time period. The lower the interest coverage ratio, the larger the debt burden is on the company. also called interest coverage.

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The interest coverage ratio was used as the primary metric to assess whether the company would make the interest payment.

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Sam saw that the interest coverage ratio of his soy milk company was quite low as he had borrowed too much when attempting to build a new factory in Canada.

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After crunching the interest rate numbers, the bank's loan department thought twice about lending to Snodgrass and Associates due to some concerning results in the interest coverage ratio figures.

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interest coverage interest coverage test