Fundamental Glossary / Debt & Financial Stability
Fixed Charge Coverage Ratio
Earnings available to cover interest plus other fixed charges, such as lease payments, divided by those charges.
Formula
(EBIT + fixed charges such as rent) / (interest + fixed charges + scheduled principal, in some versions).
What it means
Interest cover ignores rent and other commitments that are as fixed as a coupon. Fixed-charge coverage puts them in.
After lease accounting put most leases on the balance sheet, part of this concern moved into interest and depreciation. The ratio still matters for remaining fixed obligations.
How to read it
Coverage well above 1 means the operating profit can absorb the fixed commitments and still leave a cushion. Near 1, a modest dip in EBIT breaks the fixed charges.
What to watch
Know whether principal repayments are in the denominator. Including them makes the ratio a cousin of DSCR. Excluding them makes it a broader interest cover. They are not interchangeable.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.