What is Interest Coverage Ratio?
Interest Coverage tells you how comfortably a company's operating profits cover its interest payments. A ratio above 5 is generally strong; below 2 raises real concerns about debt-service ability, especially in a downturn or rising-rate environment.
Formula
Interest Coverage = Operating Income ÷ Interest Expense
How TopTier Strategy uses Interest Coverage Ratio
Interest coverage is a core Financial Health screen — it answers 'can the business actually afford its debt?' directly.
Related Glossary Terms
Other concepts in the Financial Health pillar.
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