Interest Coverage Ratio Calculator – ICR & Times Interest Earned

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Calculate the Interest Coverage Ratio (ICR) to assess how easily a company can pay interest on its outstanding debt from operating earnings.

ICR: 5.00x — Strong ✅
Interpretation: Company easily covers interest payments.

Formula: ICR = EBIT (or EBITDA) ÷ Interest Expense. Higher ratio indicates lower risk. Typically, > 3.0x is considered safe, 1.5–3.0x is moderate, and < 1.5x is risky.

What is the Interest Coverage Ratio (ICR)?

The Interest Coverage Ratio (ICR), also known as Times Interest Earned (TIE), measures a company's ability to pay interest on its outstanding debt from operating earnings [citation:2][citation:9]. It is a key indicator of financial health and debt servicing capacity [citation:1][citation:4].

ICR = EBIT ÷ Interest Expense

Where:

  • EBIT — Earnings Before Interest and Taxes (operating profit)
  • Interest Expense — total interest payments due on debt

A higher ICR indicates stronger financial health and lower default risk [citation:5]. Typically, an ICR above 3.0x is considered safe, while below 1.5x signals financial distress [citation:7][citation:12]. The metric is widely used by lenders, investors, and credit rating agencies to assess a company's ability to service its debt [citation:1][citation:4].

Interpretation guide:

  • > 5.0x — Excellent, strong coverage
  • 3.0 – 5.0x — Good, healthy coverage
  • 1.5 – 3.0x — Moderate, monitor closely
  • < 1.5x — Weak, high risk of default
  • < 1.0x — Distressed, earnings insufficient

How to Use This Calculator

  1. Enter EBIT or EBITDA: Input the company’s earnings before interest and taxes (or EBITDA for a less conservative metric).
  2. Enter Interest Expense: Input the total interest payments due on outstanding debt.
  3. Select Coverage Type: Choose whether to use EBIT (common, conservative) or EBITDA (less conservative).
  4. Calculate: Click the “Calculate ICR” button or press Enter.
  5. Reset: Use the “Reset” button to restore default values.
  6. Interpretation: The result shows the ICR as a multiple. For example, an ICR of 5.0x means operating earnings can cover interest expense 5 times over.

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