# Interest Coverage Ratio Calculator

URL: https://speedycalculator.com/calculators/finance/interest-coverage-ratio/
Last updated: 2026-10-25

> The interest coverage ratio calculator divides a company's EBIT by its interest expense to show how many times operating profit covers interest – a key measure of credit risk.

## Inputs

- EBIT
- Interest expense

## Results

- Interest coverage ratio
- Assessment

## Formula

```
Interest coverage ratio = EBIT ÷ interest expense
```

## Explanation

Lenders and rating agencies watch interest coverage closely. A ratio below 1.5 is a warning sign; below 1 means operating profit doesn't even cover interest. Strong companies often exceed 5–8×.

### How to use the Interest Coverage Ratio Calculator

- **EBIT**
- **Interest expense**

Results update as you type, and every field accepts the units shown in its menu.

### How it works

Enter EBIT and interest expense.

### Tips

- Check whether rates are quoted annually, semi-annually or per period.
- Bond prices and yields move in opposite directions – a higher yield means a lower price.
- Use the bond's clean price (without accrued interest) for yield calculations.
- Credit ratios are most useful when tracked over several years.

### Common mistakes to avoid

- Confusing the coupon rate with the yield.
- Using the face value instead of the market price.
- Forgetting that callable bonds may be redeemed before maturity.

### Inputs explained

FieldWhat to enterEBITAmount in your currencyInterest expenseAmount in your currency

### Example values

How the main result changes when **EBIT** changes and everything else stays at the example values above:

EBITInterest coverage ratio (×)1,250,0002.51,875,0003.752,500,00053,125,0006.253,750,0007.55,000,00010

## Worked example

Inputs — EBIT: $2,500,000; Interest expense: $500,000.

Results — **Interest coverage ratio = 5 ×**; Assessment = Strong.

## FAQ

**What is a good interest coverage ratio?**
Above 3 is generally healthy; above 5 is strong.

**How is it different from TIE?**
They are the same ratio under different names.

**Should I use EBITDA instead?**
EBITDA coverage is also used and gives a higher figure.

**What formula does the Interest Coverage Ratio Calculator use?**
Interest coverage ratio = EBIT ÷ interest expense.


## Sources

- [Corporate Finance Institute – financial ratios](https://corporatefinanceinstitute.com/)