The interest coverage ratio, or ICR is a financial metric that indicates a company's ability to pay the interest on its outstanding debt. It is calculated by dividing a company's EBIT by the interest expense during the same period. Similarly, we can use EBITDA to calculate this ratio as well. It provides a more generous view of a company's ability to pay its interest expenses. That’s because it adds back in depreciation and amortization.
Learn Interest Coverage Ratio with interactive examples and practice exercises in our Performance Metrics module.
This interactive learning module helps you understand Interest Coverage Ratio through hands-on practice and real-world examples.