what does a bad interest coverage ratio indicate 
a bad interest coverage ratio is any number below one as this means that the company s current earnings are insufficient to service its outstanding debt the chances of a company being able to continue to meet its interest expenses on an ongoing basis are still doubtful even with an interest coverage ratio below 1 5 especially if the company is vulnerable to seasonal or cyclical dips in revenues the bottom linethe interest coverage ratio or times interest earned tie ratio is used to determine how well a company can pay the interest on its debts and is calculated by dividing ebit ebitda or ebiat by a period s interest expense generally a ratio below 1 5 indicates that a company may not have enough capital to pay interest on its debts however interest coverage ratios vary greatly across industries therefore it is best to compare ratios of companies within the same industry and with a similar business structure 