Posted inInvesting
Interest Coverage Ratio: Understanding and Calculating
Financial analysts, investors, and creditors utilize the interest coverage ratio (ICR) as a pivotal financial metric to assess not only a company's creditworthiness but also its stability. This ratio quantifies: with its earnings before interest and taxes (EBIT), how many times can the entity cover its outstanding debt's interest expenses? A higher ICR: this indicates a company's superior ability to service its debt obligations. Indeed, it reflects the financial robustness and stability of the organization. To calculate the ICR, one…