Interest Coverage Ratio Calculator
The Interest Coverage Ratio (ICR) measures how many times a company's earnings can cover its interest expense for the same period. Higher values indicate greater ability to service debt; values below 1 mean earnings are insufficient to cover interest.
This calculator divides the earnings figure you provide (commonly EBIT; EBITDA may be used where noted) by the interest expense for the same reporting period. Use period-matched inputs (annual vs quarterly) and note the limitations and assumptions described below.
Inputs
Results
Interest Coverage Ratio (times)
4
| Output | Value | Unit |
|---|---|---|
| Interest Coverage Ratio (times) | 4 | times |
Visualization
Methodology
We use a single, transparent formula: ICR = Earnings available to cover interest / Interest expense. Earnings should be the measure management uses for debt servicing analysis (EBIT or EBITDA). Interest expense must be the cost of interest for the same period as earnings.
Recommended operational controls include input validation to prevent division by zero, documentation of whether EBITDA or EBIT is used, and sensitivity checks. For model governance and risk controls follow relevant standards such as ISO risk management guidance, NIST controls for operational integrity, IEEE standards for numerical accuracy where applicable, and OSHA guidance for workplace financial controls and reporting processes.
Further resources
External guidance
Expert Q&A
What is a healthy Interest Coverage Ratio?
There is no universal cutoff; many lenders look for an ICR above 2.0–3.0 for healthy coverage. Higher values provide more cushion. Interpret in context of industry norms, cash flow volatility, and covenant language.
Should I use EBIT or EBITDA as earnings?
Use the measure that best matches your analysis and debt covenants. EBIT includes depreciation and amortization; EBITDA excludes them. Document your choice and be consistent when comparing across firms.
What if earnings or interest expense are negative or zero?
If earnings are negative, the ICR will be negative and indicates earnings do not cover interest. If interest expense is zero or near zero, the ratio is undefined or may mislead—review underlying accounting or reporting and avoid using the ratio in isolation.
How accurate is this calculator?
This tool performs straightforward arithmetic. Accuracy depends on the correctness and period alignment of your inputs. For formal financial reporting, auditing, or regulatory compliance, validate calculations against source financial statements and follow organizational model validation procedures aligned with ISO and NIST guidance.
Does this calculator comply with regulatory standards?
The calculator itself is a numerical tool and not a regulated control. Users should apply governance, validation, and documentation consistent with ISO risk management principles and NIST recommended controls for operational systems when integrating results into decision processes. OSHA guidance may apply to organizational processes, and IEEE standards can inform numeric stability and implementation testing.
Sources & citations
- National Institute of Standards and Technology (NIST) — https://www.nist.gov/
- International Organization for Standardization (ISO) — https://www.iso.org/
- IEEE Standards Association — https://standards.ieee.org/
- Occupational Safety and Health Administration (OSHA) — https://www.osha.gov/