Interest cover - Interest cover measures the amount of interest paid by a company on its borrowings against its operating profit in the same period.The ratio shows the impact of gearing on a company"s profit and loss account. If the figure is low, a small reduction in operating profits, or a rise in the cost of borrowing, can wipe out pre-tax profits. To calculate interest cover, divide the operating profits by the interest paid.Example: a company which has profits of £4m and which pays net interest of £1m, has interest cover of 4.
Interest cover : interest cover measures the amount of interest paid by a company on its borrowings against its operating profit in the same period.the ratio shows the impact of gearing on a company"s profit and loss account. if the figure is low, a small reduction in operating profits, or a rise in the cost of borrowing, can wipe out pre-tax profits. to calculate interest cover, divide the operating profits by the interest paid.example: a company which has profits of £4m and which pays net interest of £1m, has interest cover of 4.
Interest cover