Interest Cover Ratio

gillybeanburke

Hi Everyone,

Can someone help me? I'm very confused over the Interest Cover Ratio. I have seen it written at least three different ways. What is the correct version please? (I have seen versions with both Gross and Net Profit used:crying:).

Cheers!

SandyHood

Interest cover ratio shows
How many times can you afford to pay the interest that is falling due by using the profits?

So you really want to know how much profit you have made before taking off the interest (or any corporation tax)

Profit before interest and tax
......Annual interest payable


If your operating profit is the same as your profit before interest and tax then you could use that instead, but sometimes there might be profits/losses on the disposals or other non-operating costs to take into account.

gillybeanburke

Thank you

Thank you very much Sandy, your information has been invaluable as usual.
I don't know what us students would do without you.:001_rolleyes:

Regards
Gillian