Interest Coverage Ratio Calculator
The interest coverage ratio divides operating profit by interest expense, showing whether operating earnings are enough to cover interest payments. A ratio of 1 means operating profit exactly matches interest expense; below 1 means operating profit alone cannot cover the interest.
Your numbers
Interest coverage ratio
4×
What it means
The interest coverage ratio is 4×. Operating profit covers interest with plenty of room to spare.
Formula
Interest coverage ratio = Operating profit ÷ Interest expense
A ratio above 3 is often treated as a safe zone, but it is calculated from operating profit under current conditions, and that profit can fall quickly in a downturn. Some statistics classify a company as a "zombie firm" after three straight years below 1.
What to enter
| Input | Default | Accepted range |
|---|---|---|
| Operating profitProfit after cost of sales and operating expenses, before interest and tax. | 200,000,000 | 0 and up |
| Interest expenseInterest paid on borrowed money over the period. | 50,000,000 | 1 and up |
Step by step
Quick reference table
Results when only Operating profit changes and everything else stays put.
| Operating profit | Interest coverage ratio (×) |
|---|---|
| 100,000,000 | 2 |
| 150,000,000 | 3 |
| 200,000,000 | 4 |
| 300,000,000 | 6 |
| 400,000,000 | 8 |
What each result means
| Result | At default values |
|---|---|
| Interest coverage ratio (×)Operating profit over interest expense — how many times over the interest is covered. | 4 |
Common mistakes
A ratio above 3 is often treated as a safe zone, but it is calculated from operating profit under current conditions, and that profit can fall quickly in a downturn. Some statistics classify a company as a "zombie firm" after three straight years below 1.
Glossary
- Operating profit
- Profit after cost of sales and operating expenses, before interest and tax.
- Interest expense
- Interest paid on borrowed money over the period.
- Interest coverage ratio
- Operating profit over interest expense — how many times over the interest is covered.
Frequently asked questions
QHow is Interest Coverage Ratio Calculator calculated?
Interest coverage ratio = Operating profit ÷ Interest expense — The interest coverage ratio divides operating profit by interest expense, showing whether operating earnings are enough to cover interest payments. A ratio of 1 means operating profit exactly matches interest expense; below 1 means operating profit alone cannot cover the interest.
QCan you walk through an example?
With Operating profit 200,000,000, Interest expense 50,000,000, the answer is Interest coverage ratio 4×.
QWhat do I need to enter?
Enter Operating profit, Interest expense. The result recalculates as you type, and an empty box counts as zero.
QHow much does the answer move if I change a number?
Changing only Operating profit moves the answer to Operating profit 100,000,000 → Interest coverage ratio (×) 2 and Operating profit 400,000,000 → Interest coverage ratio (×) 8. The table below lays out five steps.
QHow are the numbers rounded?
Money is shown to the nearest whole unit, percentages to one decimal place and everything else to two. What you see is rounded; the calculation itself carries the unrounded value forward.
QAnything to watch out for?
A ratio above 3 is often treated as a safe zone, but it is calculated from operating profit under current conditions, and that profit can fall quickly in a downturn. Some statistics classify a company as a "zombie firm" after three straight years below 1.
Related calculators
Tax rates and interest conventions differ by country and product — check your contract for real transactions.