Fixed Charge Coverage Ratio

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on

Jul 24, 2020, 6:28:07 PM

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on

May 15, 2015, 7:42:22 AM

$"Fixed Charge Coverage Ratio" = ( "EBIT" + "Fixed Charges before taxes" )/ ( "Fixed Charges before taxes" + "Interest Expense " )$

$EBIT$

$"FCBT"$

$IE$

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The Fixed Charge Coverage Ratio (FCCR) is used to compute how many times a firm can pay its fixed costs with its income before interest and taxes.

A higher FCCR is preferred because it indicates a healthier and less risky business to invest in or loan to. A lower FCCR is a turnoff for creditors and investors because it indicates that the business can barely meet its monthly bills.

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