Interest Cover

A measure of the ability to service its interest payments from the profits earned by the business. A result of more than 2 is generally considered to be safe, but businesses with volatile earnings may require a higher level of cover. A lower result indicates that the business is more burdened by debt expense. A lower result may also identify the potential risk that profits will be insufficient to cover interest payments. A high result may indicate that the business can easily meet its interest obligations. For this period, interest cover is less than the safety target of 2 times.