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Finance & coverage

Interest Coverage Calculator

Calculate a simplified times-interest-earned ratio from period earnings and interest expense, including loss and zero-interest cases.

25 / CALCULATE EBIT COVERAGE

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Starting values are illustrative. Use your own costs, rates and assumptions.

INPUT GROUP 01

Period earnings and expense

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Read the method and example

YOUR CALCULATION

Coverage compares period EBIT with the same period interest expense.

EBIT interest coverage (times)

6

EBIT less entered interest

$50,000.00

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How the interest coverage calculator works

EBIT interest coverage = earnings before interest and tax ÷ interest expense. Both amounts belong to the same period, and the result is a times multiple. The separate EBIT-less-interest subtotal is arithmetic rather than after-tax net income.

Signed EBIT preserves a loss as negative coverage when interest is positive. Zero interest gives an undefined ratio, shown as a dash rather than infinity. Zero earnings with positive interest gives zero coverage.

The tool does not include principal repayments, cash taxes, capital expenditure, lease-specific definitions or covenant adjustments. Earnings coverage is not the same as a cash debt-service forecast, and no universal acceptable multiple is assumed.

Worked example

EBIT of 60,000 divided by 10,000 interest expense gives 6 times coverage and 50,000 EBIT less interest. Increasing interest to 15,000 gives 4 times coverage. A 10,000 EBIT loss with 10,000 interest gives −1 time coverage.

Sources and assumptions

The source material explains the underlying calculation or pricing structure. Entered prices, costs, schedules and scenario choices are your assumptions; this tool does not obtain supplier quotes or predict actual results.

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