Calculate how many times operating profit (EBIT) can cover interest expense: ICR = EBIT ÷ interest expense. An EBITDA variant, a reverse solver from a target ICR, and a two-company comparator are available — all with substitution steps and descriptive labels.
Explicit variant: ICR (EBITDA) = EBITDA ÷ interest expense. Looser than the standard EBIT variant because it adds back non-cash costs.
| ICR range | Description |
|---|---|
| < 1 | Operating profit is not yet enough to cover interest expense |
| 1 – 1.5 | Interest expense is covered with a narrow margin |
| 1.5 – 3 | Interest expense is covered with a more comfortable margin |
| ≥ 3 | Operating profit is several times the interest expense |
The interest coverage ratio (ICR), also known as times interest earned (TIE), is a solvency ratio measuring how many times operating profit (EBIT) can cover debt interest expense. Example: EBIT 8,580,000 with interest expense 3,000,000 gives ICR 2.86 — meaning operating profit is 2.86 times interest expense.
The standard formula: ICR = EBIT ÷ interest expense. Example substitution: ICR = 8,580,000 ÷ 3,000,000 = 2.86. The result is stated in multiples (×), with no currency unit. The calculator on this page shows every substitution step to keep the math transparent.
The standard variant uses EBIT (more conservative, because depreciation and amortization still count as costs). The EBITDA variant adds back those non-cash costs, making the ratio looser. Example: with interest expense 3,000,000, EBIT 8,580,000 gives ICR 2.86; while EBITDA 8,680,000 (EBIT + depreciation 100,000) gives ICR 2.89. Both are valid as long as the convention is stated explicitly — this calculator labels every result explicitly.
The reading is descriptive: below 1× means operating profit is not yet enough to cover interest expense; 1–1.5× means covered with a narrow margin; 1.5–3× means covered with a more comfortable margin; ≥ 3× means operating profit is several times interest expense. These thresholds are common conventions used by analysts (some require above 2 for stable companies, others look for above 3), not fixed rules — each industry has a different debt profile.
ICR uses only one period of operating profit and ignores debt principal repayments, maturity schedules, and actual cash flow (EBIT is an accounting figure, not cash). A company can also show a healthy-looking ICR yet lack the cash flow to service its debt. ICR is therefore never used alone in analysis — it is complemented by other ratios such as debt-to-equity, current ratio, and debt service coverage ratio.
ICR only measures interest-expense coverage (EBIT ÷ interest expense), while DSCR measures the ability to pay all debt obligations including principal installments. DSCR gives a fuller picture of debt burden, but its data (principal installments per period) is harder to obtain. The comparison on this page is limited to ICR across companies or across periods; for full debt coverage including principal installments, also see the DSCR calculator at <a href="/tools/dscr/">/tools/dscr/</a>.
No — this calculator’s results are purely educational and not investment advice. ICR is one of many financial-health indicators; investment or credit decisions consider official financial statements, business prospects, industry conditions, and other factors. For real decisions, verify these figures against the company’s official financial statements and consult a licensed professional.
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