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Saturday, December 4, 2010

Financial Metrics - Total Coverage Ratio

The Total Coverage Ratio goes one step further than times interest earned, because debt obliges the borrower to not only pay interest but make payments on principle as well.

(EBIT / I) + (s / (1-h)) = Total Coverage Ratio

I = interest payments
s = payment on principle figured on income after taxes (1-h)

Read more about ratios at:
Financial Metrics - Ratio Analysis Considerations