Ratio Analysis
Interest Coverage
= |
EBITDA |
|
Interest Expense |
Indicates what portion
of debt interest is covered by a company's cash
flow situation.
| Things to remember |
- A ratio under 1 means that the
company is having problems generating enough cash
flow to pay its interest expenses.
- Ideally you want the ratio to
be over 1.5.
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[Click
on the button above to see the financial statement] |
Interest Coverage Analysis:
If you will notice, Cory's Tequila Co. doesn't have any long
term debt - therefore you will not find an interest expense.
What a great position to be in, practically debt free. Companies
with a ratio below 1 could run into serious trouble servicing
its loan payments and are considered to be in high risk of defaulting.
Because Cory's Tequila Co. has no interest expense its interest
coverage ratio is infinite...obviously the best you could possibly
have.
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