# Interest Coverage (EBIT/Interest)

Operating profit divided by interest expense.

## Definition

Interest coverage measures how comfortably the company's operating profit covers its interest payments. A ratio of 5x means operating profit is 5x the interest bill.

## Formula

Operating Profit (EBIT) ÷ Interest Expense

## Why it matters

Interest coverage is the most-watched credit metric for non-financial companies. Below 3x is considered weak; below 1.5x is distress. Sustained strong interest coverage is what allows a company to maintain investment-grade credit ratings.

## How Standard Equity uses it

Checked in the SE Grade's quality pillar (EBIT ÷ interest expense) when a company pays interest. Not used for banks, insurers or broker-dealers.

## The metric

| Category | Balance Sheet |
| -------- | ------------- |
| Unit     | x             |

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