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Interest cover = operating profit / interest payable. Lenders watch it to check profit comfortably covers interest.
Step 1: find your operating profit (EBIT)
Take your earnings before interest and tax — operating profit. This is the profit available to meet financing costs before those costs are deducted. It is the top of the interest cover ratio.
Step 2: total your interest
Add up the interest you pay across all borrowing over the same period — loans, asset finance, overdraft. This is the figure your profit has to cover, and the bottom of the ratio.
Step 3: divide
Divide operating profit by total interest. The result is your interest cover ratio. A figure of 3 means profit covers interest three times over — comfortable. Below 1.5 is a warning that interest is consuming too much of your earnings.
How it differs from DSCR
Interest cover measures profit against interest only; DSCR measures cash against interest and principal. DSCR is the stricter test lenders lean on, but interest cover is a fast sanity check. Use both — see how to calculate DSCR.
Work it out
Use the calculator to compute your interest cover in seconds.
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Frequently asked questions
How do I calculate interest cover?
Divide operating profit (earnings before interest and tax) by the total interest you pay over the same period. A result of 3 means profit covers interest three times over.
What is a good interest cover ratio?
Around 3 or higher is comfortable, showing profit covers interest with plenty to spare. Below about 1.5 is a warning sign that interest is consuming too large a share of earnings.
How is interest cover different from DSCR?
Interest cover compares profit to interest only, while DSCR compares cash to interest and principal together. DSCR is stricter and the one lenders rely on most; interest cover is a quick sanity check.
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