Interest Coverage Ratio Calculator

Interest coverage ratio = EBIT / interest expense. Defaults: 400 of EBIT against 100 of interest expense gives 4.00x. A ratio below roughly 1.5x is often treated as a red flag by lenders.

Interest coverage ratio is conventionally quoted as a multiple (like 4.00x) rather than a percentage, since that is how lenders and analysts read it on financial statements. The percent version is shown too, for reference.

Use whatever interest expense figure matches the period or balance sheet date you are analyzing, and make sure EBIT covers the same period so the ratio is apples-to-apples.

Generally yes for interest coverage ratio -- more cushion is safer. But an unusually high ratio can also mean a company is sitting on idle capital instead of deploying it, so compare against industry norms rather than assuming bigger is always better.