EBITDA To Fixed Charges

AAA

DEFINITION of 'EBITDA To Fixed Charges'

A ratio used to measure a company's ability to incur additional debt or its ability to pay off existing debt. The ratio is usually measured as EBITDA over fixed charges over a trailing four quarter period. In this ratio, fixed charges generally refers to interest expenses, but there are variations on this ratio. Compliance by debt holders to maintain a specific level of EBITDA to fixed charges is often required in debt agreements.

INVESTOPEDIA EXPLAINS 'EBITDA To Fixed Charges'

EBITDA to Fixed Charges is not defined under GAAP principles. It is an extra measure used to better inform investors as to the future growth possibilities for the future. As it is not GAAP, uniformity among companies can not be guaranteed.

RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Earnings Before Interest & Tax ...

    An indicator of a company's profitability, calculated as revenue ...
  3. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  4. Earnings Before Interest, Taxes, ...

    An indicator of a company's financial performance which is calculated ...
  5. Earnings Before Interest, Depreciation ...

    A measure of the earnings of a company that adds the interest ...
  6. Debt-Service Coverage Ratio - DSCR

    In corporate finance, it is the amount of cash flow available ...
RELATED FAQS
  1. What is the average price-to-earnings ratio in the chemicals sector?

    The price-to-earnings ratio (P/E) is an important valuation metric used in fundamental analysis. It tells investors how much ... Read Full Answer >>
  2. What is the prime cost formula?

    The term "prime cost" refers to the direct costs of manufacturing an item. It is calculated by adding the cost of raw materials ... Read Full Answer >>
  3. How can I lower my effective tax rate without lowering my income?

    There are lots of ways to lower your effective tax rate, although your individual circumstances determine whether you can ... Read Full Answer >>
  4. For what types of investments is the payout ratio the most relevant?

    The payout ratio is most relevant for investments that pay out dividends to shareholders. The payout ratio indicates the ... Read Full Answer >>
  5. How does the use of International Financial Reporting Standards (IFRS) affect key ...

    While much has been achieved since 2002 in convergence between international financial reporting standards (IFRS) and U.S. ... Read Full Answer >>
  6. What is the justification for allowing deferred tax liabilities?

    A deferred tax liability tracks the temporary difference that arises between a company's income taxes that will be due in ... Read Full Answer >>
Related Articles
  1. Markets

    A Clear Look At EBITDA

    This measure has its benefits, but it can also present earnings through rose-colored glasses.
  2. Markets

    Relative Valuation Of Stocks Can Be A Trap

    This method of valuing a company can make it look like a bargain when it is not.
  3. Fundamental Analysis

    Analyzing Operating Margins

    Find out how to put this important component of equity analysis to work for you.
  4. Markets

    How To Evaluate The Quality Of EPS

    Companies can manipulate their numbers, so you need to learn how to determine the accuracy of EPS.
  5. Options & Futures

    EBITDA: Challenging The Calculation

    This measure has a bad rap, but it's still a valuable tool when used appropriately.
  6. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  7. Investing

    What A Rate Hike May Mean For Stocks

    By the end of the year, investors will likely be contending with the first Federal Reserve (Fed) rate hike in nearly a decade.
  8. Fundamental Analysis

    How to Calculate a Coverage Ratio

    In broad terms, the higher the coverage ratio, the better the ability of the enterprise to fulfill its obligations to its lenders.
  9. Technical Indicators

    Will These High-Flying Stocks Stay Hot in 2015?

    These 10 stocks were on fire in 2014. Will they stay hot?
  10. Investing

    Apple or Google: Which is the Better Bet?

    Apple and Google have made many investors rich since the turn of the century. Which is more appealing going forward?

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center