Groundlearn / Glossary / Interest coverage ratio
Interest coverage ratio
A CFA and FRM term, defined in plain English with the distinction examiners test.
What it means
EBIT divided by interest expense — how many times earnings cover the interest bill.
The exam angle
A primary input to credit ratings and to covenant tests.
Where it appears in the syllabus
- Financial Statement AnalysisCFA Level I · exam weight 11–14% · The three statements, inventories, long-lived assets, quality of earnings.
- Fixed IncomeCFA Level I · exam weight 11–14% · Pricing, yield measures, duration, convexity, credit spreads.
- Credit Risk Measurement & ManagementFRM Part II · exam weight 20% · Merton and reduced-form models, credit VaR, counterparty risk, CVA, CDOs.
Related terms
- Accrual accountingRecognising revenue when it is earned and expenses when they are incurred, regardless of when cash moves.
- Balance sheetA statement of what a company owns and owes at a single point in time.
- Book valueThe accounting value of equity: assets less liabilities as reported.
- Cash conversion cycleThe time between paying for inventory and collecting cash from the customer.
- Cash flow from operationsCash generated by the core business, before investment and financing.
- Current ratioCurrent assets divided by current liabilities, a rough test of short-term solvency.
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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