Click Ratio Name For More Information

• Current Ratio
• EBIT / Interest
• Sales / Receivables
• Sales / Net Fixed Assets
• Cost of Sales / Inventory
• Quick Ratio
• Debt / Worth
• Sales / Working Capital
• Cost of Sales / Payables
• Depreciation / Net Sales
• Officers & Owners Salaries / Net Sales
• Fixed Assets / Tangible Net Worth
• % Profit Before Taxes / Tangible Net Worth
• % Profit Before Taxes / Total Assets
• Net Profit + Depreciation / Current Portion Long Term Debt

EBIT / Interest

Earning Before Interest and Taxes (EBIT) is your operating net profit.

What it measures

This ratio is used to measure the company's ability to make interest payments on its debts.  The higher the ratio, the better the company is able to take on debt.

How is the ratio calculated

Divide operating income by interest payments for the year.  For example, you have an net income of  60000, taxes of 13500, and interest of 25000 then the ratio will be calculated

    60000 + 13500 + 25000
    --------------------------    =    3.94
                25000

Target

The target for the EBIT / Interest ratio is 2.85

How to improve your EBIT / Interest ratio

Pay down any debt.  This will lower the interest payment which will increase the ratio.