Investing for Beginners .EU, investing

investingforbeginners.eu Wealth may be an excellent thing, for it means power, and it means leisure, it means liberty.
James Russell Lowell

Investment Dictionary


Browse by search:

Browse by Letter: A B C D E F G H I J K L M N O P Q R S T U V W X Y Z All

EBITDA Coverage Ratio

 

EBITDA coverage ratio (also called EBITDA to Interest Coverage Ratio) shows company’s capability to deal with its financial leverage. If this ratio is too low, that may show company is in trouble and may have difficulties to payout its debts. 

 

Even if EBITDA coverage ratio is little lower (the higher ratio is the better) than 1, company may have problems. That may happen if company is needed to make investments in fixed assets to maintain its business at least in current level, or it has to redeem some financial liabilities and nobody else wants to lend funds at previous interests (it may happen if market conditions change).

 

EBITDA coverage ratio calculation


EBITDA coverage ratio = EBITDA / Interest expenses


EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) = Pretax Profit + Financial expenses – Financial Income + Taxes + Depreciation + Amortization.


EBITDA also is used for EBITDA multiple calculation.  

 

Instead of EBITDA coverage ratio a interest coverage ratio is often used, however the first one has more advantages.

 






Last searches: Philosophy , asset markets , pref , portfolio , pretax cost of debt , penny , share , stock prices , synergy , stock market crash , investing , investment , beginners , stocks