{
  "id": "interest-coverage-ratio",
  "version": "f95200b87916",
  "status": "published",
  "name": "Interest Coverage Ratio Calculator",
  "question": "What is my interest coverage ratio?",
  "summary": "Computes the interest coverage ratio (times interest earned): earnings before interest and taxes divided by interest expense, from EBIT or from net income.",
  "category": "finance",
  "subcategory": "business",
  "url": "https://www.acalculator.org/finance/interest-coverage-ratio-calculator",
  "markdown": "https://www.acalculator.org/finance/interest-coverage-ratio-calculator.md",
  "kind": "function",
  "method": "From operating income: EBIT as typed. From net income: EBIT = net income + interest expense + income tax expense. Interest coverage ratio = EBIT ÷ interest expense.",
  "assumptions": [
    "All amounts are for the same period, from one income statement.",
    "Interest expense is the interest on all debt; income tax expense may be negative for a tax benefit.",
    "Arithmetic is exact on the typed decimals; the ratio shows to 2 decimals and money to the cent, halves up."
  ],
  "inputs": {
    "$schema": "https://json-schema.org/draft/2020-12/schema",
    "type": "object",
    "properties": {
      "from": {
        "title": "Start from",
        "description": "Operating income (EBIT), or net income with taxes and interest added back.",
        "type": "string",
        "enum": [
          "ebit",
          "net"
        ]
      },
      "ebit": {
        "title": "Operating income (EBIT)",
        "description": "Earnings before interest and taxes. Negative for an operating loss.",
        "type": "number",
        "x-unit": "USD",
        "minimum": -1000000000000000,
        "maximum": 1000000000000000
      },
      "ni": {
        "title": "Net income",
        "description": "Profit after every expense, interest and tax. Negative for a loss.",
        "type": "number",
        "x-unit": "USD",
        "minimum": -1000000000000000,
        "maximum": 1000000000000000
      },
      "tax": {
        "title": "Income tax expense",
        "description": "Income tax expense for the period. Negative for a tax benefit.",
        "type": "number",
        "x-unit": "USD",
        "minimum": -1000000000000000,
        "maximum": 1000000000000000
      },
      "int": {
        "title": "Interest expense",
        "description": "Interest charged on all debt for the same period.",
        "type": "number",
        "x-unit": "USD",
        "exclusiveMinimum": 0,
        "maximum": 1000000000000000
      }
    }
  },
  "outputs": {
    "coverage": {
      "label": "Interest coverage ratio",
      "description": "EBIT ÷ interest expense: how many times operating income covers the interest.",
      "format": "number"
    },
    "earnings": {
      "label": "EBIT (operating income)",
      "description": "As typed, or net income + interest expense + income tax expense.",
      "format": "money"
    }
  },
  "defaultAnswer": {
    "inputs": {
      "from": "ebit",
      "ebit": 43000,
      "ni": 35000,
      "tax": 6000,
      "int": 2000
    },
    "outputs": {
      "coverage": 21.5,
      "earnings": 43000
    },
    "text": "EBIT of $43,000.00 is 21.5 times the interest expense of $2,000.00."
  },
  "examples": [
    {
      "given": {
        "from": "ebit",
        "ebit": 43000,
        "int": 2000
      },
      "expect": {
        "coverage": 21.5,
        "earnings": 43000
      },
      "source": "OpenStax, Principles of Finance, 6.4 Solvency Ratios (times interest earned = EBIT ÷ interest expense; Clear Lake Sporting Goods $43,000 ÷ $2,000 = 21.5 times). https://openstax.org/books/principles-finance/pages/6-4-solvency-ratios: 43,000 ÷ 2,000 = 21.5"
    },
    {
      "given": {
        "from": "net",
        "ni": 35000,
        "tax": 6000,
        "int": 2000
      },
      "expect": {
        "coverage": 21.5,
        "earnings": 43000
      },
      "source": "OpenStax, Principles of Finance, 5.1 The Income Statement (Clear Lake Sporting Goods: operating income $43,000 and $38,000, interest $2,000 and $3,000, income tax $6,000, net income $35,000). https://openstax.org/books/principles-finance/pages/5-1-the-income-statement: 35,000 + 2,000 + 6,000 = 43,000; OpenStax, Principles of Finance, 6.4 Solvency Ratios (times interest earned = EBIT ÷ interest expense; Clear Lake Sporting Goods $43,000 ÷ $2,000 = 21.5 times). https://openstax.org/books/principles-finance/pages/6-4-solvency-ratios"
    },
    {
      "given": {
        "from": "ebit",
        "ebit": 38000,
        "int": 3000
      },
      "expect": {
        "coverage": 12.666666666666666
      },
      "source": "OpenStax, Principles of Finance, 5.1 The Income Statement (Clear Lake Sporting Goods: operating income $43,000 and $38,000, interest $2,000 and $3,000, income tax $6,000, net income $35,000). https://openstax.org/books/principles-finance/pages/5-1-the-income-statement; hand calculation in content.mdx: 38,000 ÷ 3,000 = 12.67 (exact 38/3, Python Fraction)"
    },
    {
      "given": {
        "from": "ebit",
        "ebit": -10000,
        "int": 4000
      },
      "expect": {
        "coverage": -2.5
      },
      "source": "OpenStax, Principles of Finance, 6.4 Solvency Ratios (times interest earned = EBIT ÷ interest expense; Clear Lake Sporting Goods $43,000 ÷ $2,000 = 21.5 times). https://openstax.org/books/principles-finance/pages/6-4-solvency-ratios (formula); hand calculation in content.mdx: −10,000 ÷ 4,000 = −2.5"
    },
    {
      "given": {
        "from": "net",
        "ni": -2500,
        "tax": 0,
        "int": 1250.5
      },
      "expect": {
        "coverage": -0.9992003198720512,
        "earnings": -1249.5
      },
      "source": "hand calculation in content.mdx: −2,500 + 1,250.50 + 0 = −1,249.50; −1,249.50 ÷ 1,250.50 = −0.9992 (exact −2499/2501, Python Fraction)"
    }
  ],
  "sources": [
    "OpenStax, Principles of Finance, 6.4 Solvency Ratios: the times interest earned (TIE) ratio measures the company’s ability to pay interest expense on all debt incurred; times interest earned = earnings before interest and taxes (EBIT) ÷ interest expense; Clear Lake Sporting Goods $43,000 ÷ $2,000 = 21.5 times. https://openstax.org/books/principles-finance/pages/6-4-solvency-ratios (retrieved 2026-10-19)",
    "OpenStax, Principles of Finance, 5.1 The Income Statement: Clear Lake Sporting Goods (operating income $43,000 and $38,000, interest expense $2,000 and $3,000, income tax expense $6,000 and $5,000, net income $35,000 and $30,000). https://openstax.org/books/principles-finance/pages/5-1-the-income-statement (retrieved 2026-10-19)"
  ],
  "related": [
    "ebitda",
    "dscr",
    "operating-income",
    "nopat"
  ],
  "changelog": []
}