Interest coverage ratio is used to determine how easily a company can pay interest on outstanding debt.
The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period.
The lower the ratio, the more the company is burdened by debt expense. A ratio under1 means that the company is having problems generating enough cash flow to pay its interest expenses. Ideally you want the ratio to be over1.5 times.
