Fixed Charge Coverage Ratio Calculator
Calculate Fixed Charge Coverage Ratio from EBIT, interest, lease payments, and principal.
See if a company can cover all fixed financial obligations.
Fixed Charge Coverage Ratio (FCCR)
The Fixed Charge Coverage Ratio measures a company’s ability to pay all of its fixed financial obligations from its operating earnings. Lenders use FCCR to assess creditworthiness before approving loans or setting covenants.
Formula:
FCCR = (EBIT + Lease Payments) / (Interest Expense + Lease Payments + Principal Payments / (1 - Tax Rate))
Where:
- EBIT = Earnings Before Interest and Taxes
- Lease payments are added back to the numerator because they reduce EBIT
- Principal repayments are grossed up by (1 - tax rate) because they are paid from after-tax income
- Interest and lease are tax-deductible; principal repayment is not
Simplified version (when no lease payments):
FCCR = EBIT / (Interest Expense + Principal / (1 - Tax Rate))
Interpretation:
| FCCR | Assessment |
|---|---|
| Above 2.0 | Strong, comfortable coverage of all obligations |
| 1.25 to 2.0 | Adequate, reasonable buffer |
| 1.0 to 1.25 | Thin, little margin for error |
| Below 1.0 | Distressed, cannot cover fixed charges from operations |
FCCR vs DSCR vs Interest Coverage:
- Interest Coverage Ratio = EBIT / Interest (simpler, ignores principal and leases)
- Debt Service Coverage Ratio (DSCR) = Net Operating Income / Total Debt Service (used in real estate)
- FCCR is more conservative than interest coverage because it includes principal repayments
Practical note: A covenant of FCCR ≥ 1.25 is common in commercial loan agreements. If FCCR falls below the covenant minimum, the lender can call the loan or demand additional collateral.
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
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