Enter the EBIT, non-cash expenses, and interest expense into the calculator to determine the cash coverage ratio.
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Cash Coverage Ratio Formula
The following formula is used to calculate the cash coverage ratio.
CCR = ( EBIT – NCE ) / IE
- Where CCR is the cash coverage ratio
- EBIT is the earnings before tax and interest
- NCE is the non-cash expenses
- IE is the interest expense
Cash Coverage Ratio Defintion
A cash coverage ratio is a measure of the total cash that is available to pay off interest from debt.
Cash Coverage Ratio Example
How to calculate cash coverage ratio?
- First, determine the EBIT.
Calculate the earnings before interest and tax.
- Next, determine the non-cash expenses.
Measure the total non-cash expenses.
- Next, determine the interest expense.
Calculate the total interest expense.
- Finally, calculate the cash coverage ratio.
Calculate the cash coverage ratio using the equation above.
A cash coverage ratio is a measure of the available cash to pay for interest expense. The higher the ratio the larger the amount of cash to interest expense.