EBIT/Interest

The ratio of a company’s EBIT to its Interest Expense calculates the multiple of its earnings of its debt service burden. It is a widely followed ratio, especially in the case of highly-leveraged companies and/or those that have debt multiple caps written into their debt covenants. Companies that have low EBIT-Interest Expense ratios may attract negative scrutiny from analysts and investors – especially if interest coverage is declining quarter-over-quarter – as it by definition demonstrates that they have difficulty meeting their interest bills.