Interest Coverage Ratio Calculator
The Interest Coverage Ratio (ICR) measures how many times a company's earnings can cover its interest expense for the same period. Higher values indicate greater ability to service debt; values below 1 mean earnings are insufficient to cover interest.
This calculator divides the earnings figure you provide (commonly EBIT; EBITDA may be used where noted) by the interest expense for the same reporting period. Use period-matched inputs (annual vs quarterly) and note the limitations and assumptions described below.
Governance
Record 762c58ce1295 • Reviewed by Fidamen Standards Committee
Inputs
Results
Interest Coverage Ratio (times)
4
| Output | Value | Unit |
|---|---|---|
| Interest Coverage Ratio (times) | 4 | times |
Visualization
Methodology
We use a single, transparent formula: ICR = Earnings available to cover interest / Interest expense. Earnings should be the measure management uses for debt servicing analysis (EBIT or EBITDA). Interest expense must be the cost of interest for the same period as earnings.
Recommended operational controls include input validation to prevent division by zero, documentation of whether EBITDA or EBIT is used, and sensitivity checks. For model governance and risk controls follow relevant standards such as ISO risk management guidance, NIST controls for operational integrity, IEEE standards for numerical accuracy where applicable, and OSHA guidance for workplace financial controls and reporting processes.
F.A.Q.
What is a healthy Interest Coverage Ratio?
There is no universal cutoff; many lenders look for an ICR above 2.0–3.0 for healthy coverage. Higher values provide more cushion. Interpret in context of industry norms, cash flow volatility, and covenant language.
Should I use EBIT or EBITDA as earnings?
Use the measure that best matches your analysis and debt covenants. EBIT includes depreciation and amortization; EBITDA excludes them. Document your choice and be consistent when comparing across firms.
What if earnings or interest expense are negative or zero?
If earnings are negative, the ICR will be negative and indicates earnings do not cover interest. If interest expense is zero or near zero, the ratio is undefined or may mislead—review underlying accounting or reporting and avoid using the ratio in isolation.
How accurate is this calculator?
This tool performs straightforward arithmetic. Accuracy depends on the correctness and period alignment of your inputs. For formal financial reporting, auditing, or regulatory compliance, validate calculations against source financial statements and follow organizational model validation procedures aligned with ISO and NIST guidance.
Does this calculator comply with regulatory standards?
The calculator itself is a numerical tool and not a regulated control. Users should apply governance, validation, and documentation consistent with ISO risk management principles and NIST recommended controls for operational systems when integrating results into decision processes. OSHA guidance may apply to organizational processes, and IEEE standards can inform numeric stability and implementation testing.
Sources & citations
- National Institute of Standards and Technology (NIST) — https://www.nist.gov/
- International Organization for Standardization (ISO) — https://www.iso.org/
- IEEE Standards Association — https://standards.ieee.org/
- Occupational Safety and Health Administration (OSHA) — https://www.osha.gov/
- SEC — Non-GAAP Financial Measures Guidance — https://www.sec.gov/corpfin/non-gaap-financial-measures
- FASB — Financial Accounting Standards Board — https://www.fasb.org/
- CFA Institute — Global Investment Performance Standards (GIPS) — https://rpc.cfainstitute.org/gips-standards
Further resources
Versioning & Change Control
Audit record (versions, QA runs, reviewer sign-off, and evidence).
Record ID: 762c58ce1295What changed (latest)
v1.0.0 • 2025-11-26 • MINOR
Initial publication and governance baseline.
Why: Published with reviewed formulas, unit definitions, and UX controls.
Public QA status
PASS — golden 25 + edge 120
Last run: 2026-01-23 • Run: golden-edge-2026-01-23
Versioning & Change Control
Audit record (versions, QA runs, reviewer sign-off, and evidence).
What changed (latest)
v1.0.0 • 2025-11-26 • MINOR
Initial publication and governance baseline.
Why: Published with reviewed formulas, unit definitions, and UX controls.
Public QA status
PASS — golden 25 + edge 120
Last run: 2026-01-23 • Run: golden-edge-2026-01-23
Engine
v1.0.0
Data
Baseline (no external datasets)
Content
v1.0.0
UI
v1.0.0
Governance
Last updated: Nov 26, 2025
Reviewed by: Fidamen Standards Committee (Review board)
Credentials: Internal QA
Risk level: low
Reviewer profile (entity)
Fidamen Standards Committee
Review board
Internal QA
Entity ID: https://fidamen.com/reviewers/fidamen-standards-committee#person
Semantic versioning
- MAJOR: Calculation outputs can change for the same inputs (formula, rounding policy, assumptions).
- MINOR: New features or fields that do not change existing outputs for the same inputs.
- PATCH: Bug fixes, copy edits, or accessibility changes that do not change intended outputs except for previously incorrect cases.
Review protocol
- Verify formulas and unit definitions against primary standards or datasets.
- Run golden-case regression suite and edge-case suite.
- Record reviewer sign-off with credentials and scope.
- Document assumptions, limitations, and jurisdiction applicability.
Assumptions & limitations
- Uses exact unit definitions from the Fidamen conversion library.
- Internal calculations use double precision; display rounding follows the unit's configured decimal places.
- Not a substitute for calibrated instruments in regulated contexts.
- Jurisdiction-specific rules may require official guidance.
Change log
v1.0.0 • 2025-11-26 • MINOR
Initial publication and governance baseline.
Why: Published with reviewed formulas, unit definitions, and UX controls.
Areas: engine, content, ui • Reviewer: Fidamen Standards Committee • Entry ID: 826fe5103b3d