Frequently Asked Questions
What is a healthy interest coverage ratio?
A ratio of 3 or higher is generally considered healthy, 1.5 to 3 is adequate, and below 1.5 is a warning sign that earnings barely cover interest.
Should I use net income or EBIT?
Use EBIT, earnings before interest and taxes, from the income statement. Net income already subtracts interest and would understate coverage.
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This calculator provides estimates for informational purposes only. Business results vary by industry, market conditions, and execution. Not a substitute for professional business consulting, accounting, or legal advice. Consult qualified professionals before making business decisions.