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Spireframe Software, makers of Value Investor - the easiest way to learn stock analysis and valuation of stocks. Spireframe Software, makers of Value Investor - the easiest way to learn stock analysis and valuation of stocks.  
Interest Coverage Ratio
Earnings Before Income Taxes
 Interest Coverage Ratio =
 Interest Expense

Explanation of Interest Coverage Ratio:

The Interest Coverage Ratio measures how readily the company can pay its Interest Expense payments on its debt obligations.

Importance of Interest Coverage Ratio:

A high, or increasing Interest Coverage Ratio is usually a positive sign, showing the company is better able to pay its Interest Expense with its earnings.  A ratio result of 1.0 is minimal, showing the company is barely able to meet its expense payments.  Depending on the industry, a ratio value of 1.5 to 2.0 is desirable.

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