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What is EBITDA Interest Coverage Ratio?

EBITDA Interest Coverage Ratios, in particular, offer a comprehensive view of a company's ability to cover interest expenses using its earnings before interest, taxes, depreciation, and amortization (EBITDA). EBITDA Interest Coverage Ratios measure the number of times a company can cover its interest payments using its EBITDA.

What is the difference between EBITDA and EBIT coverage ratio?

The distinction between the EBITDA and EBIT coverage ratio is that the latter does not add back depreciation and amortization (D&A). EBIT → The interest coverage ratio, more often than not, refers to the EBIT coverage ratio, because it is the more conservative measure of a company’s operating cash flow, i.e. the “middle ground”.

What is the difference between EBITDA and EBIAT?

Since the interest expense will be the same in both cases, calculations using EBITDA will produce a higher interest coverage ratio than calculations using EBIT. Another variation uses earnings before interest after taxes (EBIAT) instead of EBIT in interest coverage ratio calculations.

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