Formula to calculate interest coverage ratio:

Interest Coverage Ratio = (net income + interest) / interest.

   Interest coverage ratio definition and explanation:

The interest coverage ratio is also referred to as the times interest earned ratio.

The interest coverage ratio indicates the extent of which earnings are available to meet interest payments.

A lower interest coverage ratio means less earnings are available to meet interest payments and that the business is more vulnerable to increases in interest rates. 

The interest coverage ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio. 

The interest coverage ratio is listed in our leverage ratios.

Spreadsheets to calculate ratios (includes formulas, definitions, explanations and charts):

See list of ratios , or the financial statement ratio analysis spreadsheets which are not highlighted in the left column, to see which other ratios our spreadsheets calculate, define and explain. 

Click here to order excel accounting spreadsheet to calculate 15 ratios  with formulas, definitions, calculations, charts, and explanations for each ratio.  (Includes Interest Coverage / Times Interest Earned Ratio).

Order free 3 ratio calculator spreadsheet. Current, quick and debt-to-equity ratios with formulas, calculations, charts and explanations. Email us at 3ratios@bizwiz.ca.