Interest Coverage Ratio

RECENT NEWS
The Economic Times  May 23  Comment 
The Reserve Bank of India recently asked banks to review various financial parameters of their borrowers.
The Economic Times  Apr 21  Comment 
Already, 22% of India's corporate debt has an interest coverage ratio of less than one.
The Economic Times  Sep 27  Comment 
An interest coverage ratio of below 1 means the company is not generating enough revenue to service its interest costs and may need to draw from its cash reserves.
The Hindu Business Line  Jul 3  Comment 
The bloated credit profiles of corporates make their balance sheets vulnerable due to challenges from infrastructure, commodity meltdown and low consumption demand, leaving their interest coverage ab...
The Economic Times  Jun 28  Comment 
2016 has been a year of bad debts with the spectre of debt rejig and default capturing the collective imagination. Will the quarter give first hint of change?
Commodity Online  May 29  Comment 
For ascertaining the credit quality trends of Indian corporates, Ind-Ra has focused on FFO based measures of interest coverage. For FY13, only 75% of corporates (account for 68% of outstanding debt in FY12) had FFO interest coverage above 2.0x....
Penny Stock DD  Dec 10  Comment 
The following is a list of stocks with a high short float, meaning that a significant portion of the company's shares have been shorted. All of the stocks mentioned in this list have short floats higher than 20%. Despite the apparent...
Investing School  Oct 29  Comment 
Coverage ratio is a number that refers to a company’s ability to meet its obligations. Specifically, the ratio involves dividing the company’s income or cash flow with a certain expense and this will determine the company’s financial...
Stock Market and Economic Analysis  May 14  Comment 
The Indian Stock markets have gone up over 40% in the last two months. But not everything is fine with the fundamentals of Corporate India. In this article I would primairly discuss how the interest coverage ratio (combined statistics) for all...




RELATED WIKI ARTICLES
 
TOP CONTRIBUTORS

A company's Interest Coverage Ratio is calculated as EBIT divided by Interest payments.

The interest coverage ratio is a measure of a company's ability to meet its interest payments. A higher ratio indicates a better financial health as it means that the company is more capable to meeting its interest obligations from operating earnings.

A ratio less than 1 would indicate that a company has crippling debt obligations as it uses its entire earnings to pay interest, leaving no income for the common shareholders or to repay back the debt. In such extreme cases, the company would have to sell off its assets, or raise more equity in order to repay some of the debt -- so that it can reduce its interest expense and, in turn, improve the interest coverage ratio.


Example

  • Company A generates $200,000 in earnings before interest and taxes in 2007, and has an interest expense of $100,000 during the same period. This would mean that the interest coverage ratio is 2.
Please install Flash Player to view this chart.
Please install Flash Player to view this chart.
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki