Interest Coverage Ratio
How comfortably a company can pay the interest on its debt from operating profit.
Interest Coverage = EBIT ÷ Interest Expense
Quick ICR calculator
₹Cr
₹Cr
ICR
7.50x
Interest Coverage = EBIT ÷ Interest Expense
What is the Interest Coverage Ratio?
The interest coverage ratio shows how many times a company’s operating profit covers its interest bill. A ratio of 5 means EBIT is five times the interest due.
How to interpret it
Higher is safer. A ratio below 1.5–2 is a red flag — the company is barely covering interest and is vulnerable to any dip in earnings or rise in rates.
What’s a good ICR?
> 5×
Strong
2–5×
Adequate
< 2×
Risky
Above 3 is comfortable; above 5 is strong. Below 1.5 is dangerous.
Common mistakes
- Using net profit instead of EBIT — interest is paid before tax and out of operating profit.
- Ignoring lumpy or seasonal earnings that distort a single period.
See it on a real stock
This ratio computed for any listed company.
Related ratios
All financial ratios →For educational purposes only, not investment advice. Consult a SEBI-registered advisor before investing.