2 min read
Definition
The interest cover ratio is operating profit (earnings before interest and tax) divided by total interest payable. A ratio of 3 means profit covers interest three times over; below about 1.5 signals that interest is consuming too much of earnings.
How it differs from DSCR
Interest cover looks at profit against interest only; the debt service cover ratio looks at cash against interest and principal. Lenders lean on DSCR but use interest cover as a quick check. See how to calculate it.
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