Coverage
What it measures¶
Interest coverage is how many times a company's operating earnings cover the interest it pays on its debt in a year. This check divides EBITDA — earnings before interest, taxes, depreciation and amortisation, which is operating profit with the yearly write-down of equipment and acquired assets added back — by the year's interest expense. A coverage of 4 means the business earned four times its interest bill before those items.
Why it is on the page¶
Interest has to be paid every year, in good years and bad. The thinner the cover, the less room a company has before a weak year makes it miss a payment. Rating agencies use this ratio beside leverage; the two together describe both the size of the debt and the burden of carrying it.
Thresholds, their source and the population they were fitted on¶
The check compares the figure with the sector median, the company's own five-year median and the absolute line of 4.0 times. The verdict counted in the tile is the sector comparison; the evidence panel keeps all three.
| Result | When |
|---|---|
| ✓ passed | EBITDA ÷ interest is at or above the sector median (absolute line: 4.0 times or more) |
| ✕ failed | it is below the sector median |
| ○ not evaluable | no sector benchmark is stored, or EBITDA or the interest expense is not stored |
| ○ not applicable | the company pays no interest |
On the bar, S&P's "intermediate" range — roughly 6 to 10 times — is shown as a band for reference.
- Source: Moody's 2023 rating ladder, where 4.0 times is the floor of its Ba grade (one step below "investment grade"); S&P Global Ratings' supplemental ratio table for the reference band.
- Fitted on: no statistical sample — the agencies' published grids.
- Evidence grade: practitioner convention.
- Basis: sector band, with own history beside it.
A worked example¶
Meta Platforms, fiscal year 2025 (statements stored on 25 October 2026): EBITDA covered interest 87.5 times, well above the absolute line of 4.0 but below its own five-year median of 129.9 times. With no sector benchmark stored, the check read not evaluable — no sector benchmark.
Honeywell International, the same year: no interest expense is stored for fiscal 2025, so the check read not evaluable — interest expense FY2025.
What “No verdict” means here¶
The check is not evaluable while no sector benchmark is stored, or when EBITDA or the interest expense is missing — both cases name the missing input and leave the area's count. A company that pays no interest has nothing to cover: the check is not applicable, which is a fact about the company rather than a gap in the data.
What the verdict is and is not¶
A pass says the latest year's operating earnings covered interest at least as comfortably as is typical in the sector. It is not a forecast that they will next year, not a credit rating, and not an instruction to trade the shares. The Fundamentals page's own interest coverage row uses operating profit after depreciation, so its figure is lower than this one.