Fixed-Charge Coverage Ratio

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DEFINITION of 'Fixed-Charge Coverage Ratio'

A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated as the following:

 

Fixed-Charge Coverage Ratio

INVESTOPEDIA EXPLAINS 'Fixed-Charge Coverage Ratio'

For example, since leases are a fixed charge, the calculation determining a company's ability leases would be (EBIT + Lease Expenses) / (Lease Expenses + Interest).

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