Interest Coverage Ratio (ICR) measures a company’s ability to meet its interest obligations using its operating earnings. It is calculated as EBITDA divided by Interest Expense, indicating how many times the company can cover its interest payments.

Typically calculated as the ratio between (A) and (B) where:
(A) = Cash Interest Expense; and
(B) = EBITDA (could also be EBIT)

If you would like to learn more about the debt financing process, please see our series Termgrid Primers.