A financial metric that measures a company’s ability to cover its fixed obligations—such as interest, lease payments, taxes, and sometimes capital expenditures (capex)—using its operating earnings.

Typically calculated as the ratio between (A) and (B) where:
(A) = EBITDA less Capital Expenditures less Cash Taxes; and
(B) = Cash Interest Expenses plus Mandatory Debt Repayments

If you would like to learn more about the financing process, please see our Termgrid Primers – Series 1: The Debt Financing Process.