interest cover

= fixed-charge–coverage ratio
A ratio showing the number of times interest charges are covered by earnings before interest and tax. For example, a company with interest charges of £12 million and earnings before interest and tax of £36 million would have its interest covered three times. The ratio is one way of analysing gearing and reflects the vulnerability of a company to changes in interest rates or profit fluctuations. A highly geared company, which has a low interest cover, may find that an increase in the interest rate will mean that it has no earnings after interest charges with which to provide a dividend to shareholders.

Accounting dictionary. 2014.

Look at other dictionaries:

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