Series 79: Fixed-charge Coverage Ratio

Taken from our FINRA Investment Banking Exam

Definition of the term Fixed-charge Coverage Ratio...

a measure of a company's ability to meet its interest payments. Unlike the interest coverage ratio, the fixed-charge coverage ratio is adjusted for the company’s fixed costs, producing a more conservative estimate of a company’s solvency. It equals (EBIT + fixed charges before taxes) / (interest expense + fixed charges before taxes).

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