Interest cover


 

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Interest cover

Interest cover measures the amount of interest paid by a company on its borrowings against its operating profit in the same period.The ratio shows the impact of gearing on a company's profit and loss account. If the figure is low, a small reduction in operating profits, or a rise in the cost of borrowing, can wipe out pre-tax profits. To calculate interest cover, divide the operating profits by the interest paid.Example: a company which has profits of £4m and which pays net interest of £1m, has interest cover of 4.



Similar Matches

Times interest earned ratio

Times interest earned ratio

Earnings before interest and tax, divided by interest payments.


Any interest date

Any interest date

A call provision in a municipal bond indenture that establishes the right of redemption for the issuer on any interest payment due date.


Compound interest

Compound interest

The process by which interest earned on an investment is added back to the amount invested, so increasing the amount of 'principal' on which further interest will be earned in future years.Compounding is sometimes described as the miracle of investing. The fact is that if you reinvest income in your portfolio, you will end up with a much larger amount than if you spend the income as you go along because of the effect of compounding. But to allow compounding to work its magic, you have to start young.Albert Einstein, when asked what he considered to be mankind's greatest invention, replied 'Compound interest!'


Covered interest arbitrage

Covered interest arbitrage

Occurs when a portfolio manager invests dollars in an instrument denominated in a foreign currency and hedges the resulting foreign exchange risk by selling the proceeds of the investment forward for dollars.


Equilibrium rate of interest

Equilibrium rate of interest

The interest rate that clears the market. Also called the trade-clearing interest rate.


Further Suggestions

Applied or nominal interest rate
Forward interest rate
Interest rate parity line (IRP)
Interest
Open interest
Noninterest bearing note
interest
Interest rate floor
Minority interest
gross interest
stepped interest debenture stocks
Deferred interest bond
Interest accrual rate
Interest sensitive stock
Ordinary interest
Gross interest
Daily interest
open interest
Interest rate futures contract
Interest tax shield
Uncovered interest parity
Earnings before interest and, taxes (EBIT)
Add on interest
Effective annual interest rate
Assumed interest rate


 
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