Plain-English definitions, reviewed by an independent investor
Interest Coverage
Interest coverage shows how easily a company pays its interest from operating profit.
Interest coverage shows how easily a company pays its interest from operating profit.
Coverage = Operating Income ÷ Interest Expense
Why it matters
It is the early-warning gauge for debt trouble.
Common confusion
Below 1.5 times is a flashing light that interest is a heavy burden.
Frequently Asked Questions
What coverage is safe?
Above 3–4 times is comfortable for most; below 1.5 is risky.
Why care as a stockholder?
Weak coverage can force painful choices or default.