Finance category

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Interest Coverage Ratio Calculator

Interest coverage ratio measures an entity's ability to pay interest from operating earnings. ICR = EBIT ÷ interest expense. For real estate ops, EBITDA coverage (adding back depreciation) is often used because of D&A-heavy financials. This calculator runs both and benchmarks.

Annual revenue

Operating expenses (excl. D&A)

Depreciation + amortization

Annual interest expense

Interest coverage (EBIT basis)

2.28

EBITDA coverage

3.04

EBIT

$285,000

EBITDA

$380,000

Credit health verdict

Healthy

How the math works

$800K revenue, $420K opex, $95K D&A, $125K interest: EBIT $285K, EBITDA $380K. ICR = 2.28, EBITDA coverage = 3.04. Strong — every dollar of interest is covered 2.3x from operating cash post-depreciation.

Target 2.0+ EBIT ICR for stable investments; 1.5 floor for levered real estate. Below 1.0 means operating earnings can't cover interest — a distress signal.

Editorial noteMaintained by EveryCalc - Reviewed June 2026

EveryCalc calculators are designed for fast, practical estimates with transparent inputs and no required account. We use plain formulas, visible assumptions, and related tools so visitors can check the result from more than one angle.

Results are informational only. For financial, tax, legal, medical, construction, or other high-impact decisions, verify the output against primary sources or a qualified professional.

Learn more about our review process on the EveryCalc methodology page.

How this calculator works

What this page estimates

This Interest Coverage Ratio Calculator is built to give a quick, browser-based estimate for interest coverage ratio. Interest coverage ratio measures an entity's ability to pay interest from operating earnings. ICR = EBIT ÷ interest expense. For real estate ops, EBITDA coverage (adding back depreciation) is often used because of D&A-heavy financials. This calculator runs both and benchmarks. The inputs stay on the page during normal use, and the result should be treated as an estimate for planning, comparison, or education rather than professional advice.

Calculation approach

The calculator applies the standard relationship implied by the inputs, then formats the answer so it can be checked and reused. For finance tools, the most important step is using consistent units, rates, time periods, and assumptions before comparing the result with another calculator or outside quote.

Example workflow

For example, start with a realistic value you already know, change one input at a time, and watch how the answer moves. That makes it easier to tell whether the result is being driven by the main amount, the rate, the time period, or a unit conversion.

Practical checks

Use current, real-world numbers when the result affects money, health, tax, or legal decisions.
Run a low, base, and high case when the inputs are estimates.
Check the related calculators below when the next decision depends on a different assumption.

How to interpret the interest coverage ratio result

Best use

Use the result as a planning number for comparing payments, rates, returns, tax reserves, or cash-flow choices before you request a quote or make a commitment.

Cross-check

Compare the answer with the contract, lender estimate, tax form, brokerage statement, payroll record, or invoice that will control the real-world outcome.

Watch for

Do not rely on a single optimistic rate, return, or fee assumption. Money pages work best when you run low, base, and high cases and keep professional advice separate from the estimate.

This page belongs to the Finance calculator library, so the answer should be read in the context of the decision you are modeling rather than as a universal rule.

Before relying on this interest coverage ratio estimate

Most calculator mistakes come from the inputs, not the arithmetic. Use this short audit before you reuse the answer in a spreadsheet, quote, application, or important conversation.

Confirm source numbers

Match balances, rates, fees, taxes, income, and payment dates against the lender quote, payroll record, tax form, statement, invoice, or contract.

Separate cash flow from total cost

A lower monthly payment can still cost more over time if fees, interest, taxes, or a longer term are hidden in the structure.

Run conservative cases

Test at least one higher-cost or lower-return case before using the output for a purchase, refinance, investment, loan, or tax decision.

Rerun this page when the rate, price, term, fee, tax rule, income, expense, or expected holding period changes.

How to Use

Enter revenue, operating expenses, depreciation, and interest expense.
See EBIT, EBITDA, ICR (EBIT basis), and EBITDA coverage.

Frequently Asked Questions

What's a healthy ICR for real estate?

EBIT-based ICR ≥ 1.5 is generally safe; ≥ 2.0 is strong. Heavily levered real estate often shows 1.1-1.3 on EBIT basis but 1.8-2.5 on EBITDA basis because depreciation is large. Lender covenants are typically set on EBITDA basis for real estate.

EBIT vs EBITDA?

EBIT = earnings before interest & tax. EBITDA = EBIT + depreciation + amortization. Real estate adds back D&A because it's non-cash and doesn't affect actual ability to service debt. For cash-focused lenders, EBITDA is the operative metric.

How does this differ from DSCR?

DSCR = NOI ÷ total debt service (principal + interest). ICR = EBIT ÷ interest only. DSCR captures cash drain of both; ICR is narrower. On IO loans, ICR and DSCR converge.

What about non-recurring items?

Adjust for one-time items when computing 'adjusted EBITDA' — sale gains/losses, major legal settlements, one-time insurance recoveries. Lender covenants usually work off adjusted EBITDA to prevent volatility from one-time gains gaming the metric.