Cash Coverage Ratio Formula

Given here is the formula to calculate cash coverage ratio. This ratio is useful for determining the amount of cash available to pay for a borrower's interest expense. It is desirable for cash coverage ratio to be greater than 1:1, as it indicates the availability of cash to the amount of interest to be paid. Cash coverage ratio formula is defined as (Earnings Before Interest and Taxes + Non Cash Expenses) / Interest Expense. Refer the below online calculator for manual calculations.

Formula:

Cash Coverage Ratio = (E + D) / I


Where,

E = Earnings Before Interest and Taxes (EBIT)
D = Non Cash Expenses(Depreciation)
I = Interest Expense

Related Calculator:

The cash coverage ratio formula given here simplifies your analysis of your organization's cash availability to pay for a borrower's interest expense. It is expressed as a ratio of the cash available to the amount of interest to be paid.


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