Interest coverage ratio (also times-interest-earned (TIE) ratio) indicates a company's ability to pay its debt, i.e., whether the operating profit generated is sufficient to cover all interest expenses.
$$Interest\;coverage\;ratio \mmlToken{mo}[linebreak="auto"]{=} \frac{EBIT}{Interest\;expense\;for\;the\;reporting\;period}$$
Depending on circumstances, calculations may use either EBIT or EBITDA. Interest expenses are typically sourced from the income statement for the reporting period. The interest coverage ratio should ideally be at least 2.5.
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