Interest Coverage Ratio

Interest coverage ratio is a borrower’s earnings or cash-flow measure divided by interest expense, using the definition stated by the analyst or company.

Why this matters to income investors

A borrower’s ability to cover interest affects the lender’s chance of receiving cash interest.

How to use interest coverage ratio in your research

Check the exact numerator, denominator, and reporting period in the company’s filing. Follow the trend and look for debt or interest costs growing faster than the earnings available to pay them.

This material is general education and information, not individualized investment, tax, or legal advice.