Interest Coverage Ratio

A measure of how easily a company can pay interest on its outstanding debt.

The interest coverage ratio divides a company's operating earnings by its interest expense, showing how many times over it could cover its interest payments from current profits. A low ratio signals a company may struggle to service its debt if earnings dip, while lenders and analysts typically want to see coverage well above one.

With an interest coverage ratio of just 1.2, the company had little cushion if profits fell.