Interest Coverage Ratio
Can you pay interest on your debt from your profits? Measures how many times over you can cover interest payments, from profit after depreciation, as lenders measure it. Above 3x is healthy, 1.5-3x needs watching, below 1.5x means trouble: you're struggling to service debt.
- How it's worked out
- (LTM Operating Profit − LTM Depreciation and Amortisation) / LTM Interest Expense
- Which way is better
- Higher is betterHigher is better for cash.
Written by Mandy Walker, founder of Focus on Cash. Updated October 2026. This explanation comes from the glossary inside Focus on Cash, so it matches the words you see in the app.
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