Fixed-Charge Coverage Ratio

What Does Fixed-Charge Coverage Ratio Mean?
A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated as the following:

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).

Filed Under: Formulas

Related Terms

Debt Financing
EBIT
Lease
Lease Payments
Variable Annuity
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