Fixed Charge Coverage Ratio Calculator

How it works

FCCR = (EBIT + fixed charges before tax) ÷ (fixed charges before tax + interest) · fixed charges = lease payments + other fixed charges · EBIT cushion = (FCCR − minimum) × total fixed charges

The fixed charge coverage ratio extends the interest coverage ratio by adding lease payments and other contractual fixed costs, so it shows whether a company’s earnings can meet all of its unavoidable obligations — not just interest. Lenders commonly require a minimum of about 1.25× in loan covenants; below 1.0× the business is not earning enough to pay its fixed charges. Many credit agreements define their own version (for example EBITDA minus capex and taxes over debt service), so match the definition to your contract.

Worked example

EBIT of 500,000, lease payments of 150,000 and interest of 200,000 give FCCR = (500,000 + 150,000) ÷ (150,000 + 200,000) = 650,000 ÷ 350,000 = 1.86×, above a 1.25× minimum. Interest alone is covered 2.50 times. EBIT could fall by (1.857 − 1.25) × 350,000 = 212,500 — 42.50% — before the ratio drops to 1.25×.

Sources: Corporate Finance Institute — Fixed charge coverage ratio · Investopedia — Fixed-charge coverage ratio

Frequently asked questions