# Interest-Coverage Ratio

`D18-F01-A04` · Fundamental Analysis and Valuation → Statement Ratios · archetype `record-transform` · difficulty 3/5 · verification **verified**

Full page: https://docs.thefintechbuilder.com/fundamental-analysis-and-valuation/statement-ratios/interest-coverage-ratio/
Agent skill: `npx skills add IslamBaraka90/Fintech-Algorithms-Library` — https://docs.thefintechbuilder.com/guides/agent-skill/

## Install and import

```bash
npm install fintech-algorithms
```

```ts
import { interestCoverageRatio } from "fintech-algorithms/fundamental-analysis-and-valuation/statement-ratios/interest-coverage-ratio";
```

## Signature

```ts
interestCoverageRatio(input)
```

Divides EBIT by gross interest expense on the times-interest-earned convention and reports how much of the interest bill earnings fail to cover.

## Parameters

| Name | Type | Required | Notes |
| --- | --- | --- | --- |
| `input` | `{ ebit: number; gross_interest_expense: number }` | yes | A plain object holding `ebit`, the earnings measure in the numerator, and `gross_interest_expense`, the interest charge in the denominator taken gross rather than net of interest income. Both must be finite numbers. |

## Returns

`{ ebit: number; gross_interest_expense: number; interest_coverage_ratio: number | null; coverage_shortfall: number | null; state: string; reason: string }`

`ebit` and `gross_interest_expense` echo the inputs. `interest_coverage_ratio` is their quotient and `coverage_shortfall` is the interest expense less EBIT, floored at zero. When gross interest expense is not positive both are `null`, `state` is `not-meaningful` and `reason` is `nonpositive-gross-interest-expense`; otherwise `state` is `covered` at a ratio of one or more and `not-covered` below it, with `reason` `ebit-divided-by-gross-interest-expense`.

## Errors

- When ebit or gross_interest_expense is not a finite number — throws RangeError

## Complexity

Time `O(1)`, space `O(1)`.

## Worked example

This is the worked example published in the article, replayed by the test suite on every run. The output cannot drift.

### Input

`input`:

```json
{
  "ebit": 150,
  "gross_interest_expense": 50
}
```

### Call

```ts
interestCoverageRatio(input)
```

### Returns

object with 6 fields: ebit, gross_interest_expense, interest_coverage_ratio, coverage_shortfall, state, reason

```json
{
  "ebit": 150,
  "gross_interest_expense": 50,
  "interest_coverage_ratio": 3,
  "coverage_shortfall": 0,
  "state": "covered",
  "reason": "ebit-divided-by-gross-interest-expense"
}
```

## Other exports

`dupontDecomposition`, `roicCalculation`, `cashConversionCycle`, `netDebtToEbitda`, `commonSizeStatements`, `calculate`. Every module additionally exports `run` as an alias of its primary
function, and a `meta` object carrying its catalog id, domain, family, shape and article URL.

## Verification and provenance

Tier: **verified** (via input-expected).

The worked example below is the figure published in this algorithm's article, replayed and asserted by the test suite on every build. The arithmetic cannot drift without the build failing.

Both tiers guarantee the signature. Full explanation: https://docs.thefintechbuilder.com/guides/verification/

Generated from the docs.json payload shipped inside fintech-algorithms@0.13.0.
The signature and parameter list are checked against the compiled implementation at build time,
so a description that contradicts the code fails the build rather than reaching this file.

## Links

- Article (how it works, step by step): https://thefintechbuilder.com/fundamental-analysis-and-valuation/statement-ratios/interest-coverage-ratio/
- Implementation source: https://github.com/IslamBaraka90/Fintech-Algorithms-Library/blob/main/src/fundamental-analysis-and-valuation/statement-ratios/interest-coverage-ratio/impl.ts
- Package on npm: https://www.npmjs.com/package/fintech-algorithms
- Domain index for agents: https://docs.thefintechbuilder.com/fundamental-analysis-and-valuation/llms.txt