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.

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.