{ "schema_version": "core-reviewed-term-ai-handoff-v1", "version": "core-reviewed-term-ai-handoff-v1", "contract_status": "preview", "distribution": "per_term_read_only_ai_handoff", "no_write_operations": true, "canonical": { "url": "https://core.yogoq.com/en-US/core/interest-coverage-ratio", "slug": "interest-coverage-ratio", "locale": "en-US" }, "summary": { "schema_version": "core-reviewed-term-summary-v1", "term_id": "08e5e892-99ed-54c0-89fb-3756154168b9", "canonical_slug": "interest-coverage-ratio", "canonical_url": "https://core.yogoq.com/en-US/core/interest-coverage-ratio", "locale": "en-US", "display_name": "Interest Coverage Ratio (ICR)", "english_name": null, "abbreviation": "ICR", "short_definition": "Interest coverage ratio shows how many times operating earnings can cover interest expense.", "quality": "reviewed", "publication_status": "published_reviewed", "version": "core-reviewed-term-summary-v1", "last_reviewed_at": "2026-05-14T00:00:00.000Z", "sources_count": 2, "limitations_key": "core-trust-policy-v1-2026-06-22" }, "content": { "definition": { "key": "definition", "title": "一言でいうと", "text": "Interest coverage ratio shows how many times operating earnings can cover interest expense.", "items": [] }, "formula": { "key": "formula", "title": "計算の考え方", "text": "ICR = EBIT / interest expense. EBITDA / interest expense is often reviewed as a supplemental view. Formula | Operating earnings divided by interest expense | Use it to test recurring interest-paying capacity Bridge | Beginning ICR + EBIT improvement impact - interest expense impact +/- one-time adjustments = revised ICR | Use it to explain changes between reviews Segment | Split by customer, product, channel, and period | Use it to find deterioration hidden by averages", "items": [ "Formula | Operating earnings divided by interest expense | Use it to test recurring interest-paying capacity", "Bridge | Beginning ICR + EBIT improvement impact - interest expense impact +/- one-time adjustments = revised ICR | Use it to explain changes between reviews", "Segment | Split by customer, product, channel, and period | Use it to find deterioration hidden by averages" ] }, "boundary": { "key": "boundary", "title": "含めるもの / 含めないもの", "text": "This metric is comparable only when inclusion and exclusion rules stay stable. Include | Continuing EBIT, actual interest expense, variable-rate impact | These measure interest-paying capacity Exclude | One-time gains, discontinued operations, unclear capitalized interest | They can overstate recurring capacity Define explicitly | EBITDA use, lease interest, foreign-currency interest | Treatment varies by covenant and industry", "items": [ "Include | Continuing EBIT, actual interest expense, variable-rate impact | These measure interest-paying capacity", "Exclude | One-time gains, discontinued operations, unclear capitalized interest | They can overstate recurring capacity", "Define explicitly | EBITDA use, lease interest, foreign-currency interest | Treatment varies by covenant and industry" ] }, "usage": [ { "key": "meaning", "title": "意味", "text": "Interest coverage ratio, or ICR, divides EBIT or operating income by interest expense. It is used to assess debt affordability, covenant risk, credit quality, and whether planned investment remains financeable under rate or earnings stress.", "items": [] }, { "key": "usage", "title": "役立つ場面", "text": "Sets guardrails for monitor leverage risk and covenant compliance by interpreting EBIT divided by interest expense under scenario analysis and stress tests. Signals when to adjust strategy because the debt-funded growth versus financial resilience balance is shifting in current conditions. Aligns stakeholders by turning Interest Coverage Ratio into a shared threshold for approvals and periodic reviews.", "items": [ "Sets guardrails for monitor leverage risk and covenant compliance by interpreting EBIT divided by interest expense under scenario analysis and stress tests.", "Signals when to adjust strategy because the debt-funded growth versus financial resilience balance is shifting in current conditions.", "Aligns stakeholders by turning Interest Coverage Ratio into a shared threshold for approvals and periodic reviews." ] }, { "key": "usage", "title": "使い方のポイント", "text": null, "items": [ "Define calculation windows and inputs for Interest Coverage Ratio before comparing periods or peers.", "Track leading indicators that move EBIT divided by interest expense so decisions are proactive, not reactive.", "Pair Interest Coverage Ratio with qualitative context to avoid one-number overconfidence.", "Use triggers and escalation paths so monitor leverage risk and covenant compliance changes happen on time.", "Revisit assumptions when business mix, regulation, or market conditions shift." ] }, { "key": "drivers", "title": "何が数字を動かすか", "text": "Breaking the metric into drivers clarifies what action should follow the review. EBIT | Lower earnings reduce coverage Interest expense | Higher rates or more debt reduce coverage Fixed-cost structure | Changes profit sensitivity to revenue shocks", "items": [ "EBIT | Lower earnings reduce coverage", "Interest expense | Higher rates or more debt reduce coverage", "Fixed-cost structure | Changes profit sensitivity to revenue shocks" ] } ], "misunderstandings": [ { "key": "misunderstandings", "title": "判断するときの注意点", "text": "Do not decide from the number alone; align assumptions, period, segments, and companion metrics. High ICR does not prove principal repayment or liquidity safety. One-time gains can overstate capacity. Safe levels vary by industry and cyclicality.", "items": [ "High ICR does not prove principal repayment or liquidity safety.", "One-time gains can overstate capacity.", "Safe levels vary by industry and cyclicality." ] }, { "key": "misunderstandings", "title": "よくある誤解 / 落とし穴", "text": null, "items": [ "Interest Coverage Ratio is a fixed target; in practice, thresholds depend on risk tolerance and context.", "Improving Interest Coverage Ratio always means better performance; it can hide costs or tradeoffs.", "One snapshot is enough; trends and volatility often matter more for decisions." ] } ], "examples": [ { "key": "examples", "title": "最小例", "text": "If EBIT is $50M and interest expense is $10M, ICR is 5.0x. If rates raise interest to $15M and EBIT falls to $30M, ICR drops to 2.0x. Finance should review covenants, refinancing risk, and capital spending before adding debt. After the review, the owner did not treat the metric in isolation. They compared it with companion metrics, checked segment differences, documented assumption changes, and verified data quality before changing the plan. Whether the number improved or deteriorated, the team identified the driver, assigned an owner, and fed the learning into the next budget, operating review, or experiment cycle.", "items": [] } ], "comparisons": [ { "key": "comparisons", "title": "似ている言葉との違い", "text": "Debt/EBITDA | Debt burden | ICR focuses on interest coverage Current ratio | Short-term liquidity | ICR focuses on earnings coverage DSCR | Principal and interest coverage | ICR is mainly interest-focused", "items": [ "Debt/EBITDA | Debt burden | ICR focuses on interest coverage", "Current ratio | Short-term liquidity | ICR focuses on earnings coverage", "DSCR | Principal and interest coverage | ICR is mainly interest-focused" ] }, { "key": "related_metrics", "title": "一緒に見る指標", "text": "Companion metrics turn a good-or-bad reading into a discussion of causes and actions. WACC | Cost of capital | Shows financing tradeoffs CFaR | Cash-flow downside | Tests ability to pay interest under stress Operating Leverage | Profit sensitivity | Shows how fast ICR can deteriorate", "items": [ "WACC | Cost of capital | Shows financing tradeoffs", "CFaR | Cash-flow downside | Tests ability to pay interest under stress", "Operating Leverage | Profit sensitivity | Shows how fast ICR can deteriorate" ] } ], "faq": [ { "question": "What is a safe ICR?", "answer": "It depends on industry, cyclicality, and covenants. Stress-case coverage matters more than a single period." }, { "question": "Can EBITDA be used?", "answer": "Yes as a supplemental view, but it can ignore maintenance capex and working capital." }, { "question": "Can I rely on ICR alone?", "answer": "No. Review principal repayment, liquidity, CFaR, and covenant definitions too." } ] }, "sources": { "source_refs": [ "concept:finance-concept-0274:en-US", "concept:finance-concept-0274:ja-JP", "concept:finance-concept-0058:en-US", "concept:finance-concept-0058:ja-JP", "manual_merge_map:next-exact-duplicates-2026-04-28" ], "visible_sources": [ { "label": "OpenStax: Principles of Finance", "url": "https://openstax.org/details/books/principles-finance", "kind": "Tier-S open textbook" }, { "label": "Wikipedia: Financial ratio", "url": "https://en.wikipedia.org/wiki/Financial_ratio", "kind": "Supplemental reference" } ] }, "related_terms": [ { "topic_id": "dfac33c0-8837-5ffa-a3ff-fcb574fb9742", "canonical_slug": "operating-leverage", "canonical_url": "https://core.yogoq.com/en-US/core/operating-leverage", "title": "Operating Leverage", "relation_type": "used_together" }, { "topic_id": "1a7a4236-74fb-5b6a-ac55-d24fd4fc3621", "canonical_slug": "weighted-average-cost-of-capital", "canonical_url": "https://core.yogoq.com/en-US/core/weighted-average-cost-of-capital", "title": "Weighted Average Cost of Capital (WACC)", "relation_type": "related" }, { "topic_id": "7766d374-dc50-5cb5-977b-75d585958eb3", "canonical_slug": "cash-flow-at-risk", "canonical_url": "https://core.yogoq.com/en-US/core/cash-flow-at-risk", "title": "Cash Flow at Risk (CFaR)", "relation_type": "related" } ], "quality": { "quality": "reviewed", "publication_status": "published_reviewed", "source_count": 2, "last_reviewed_at": "2026-05-14T00:00:00.000Z", "trust_policy_version": "core-trust-policy-v1-2026-06-22" }, "limitations": { "policy_version": "core-trust-policy-v1-2026-06-22", "professional_advice_boundary": "reference_only_not_professional_advice", "text": "This page is reference information for research and learning. For accounting, legal, finance, health, security, or other individual decisions, confirm against primary sources or qualified professionals.", "items": [ "Public pages support general understanding and practical context; they are not professional advice for individual cases.", "Fast-changing information such as regulations, accounting standards, prices, product specs, and legal requirements should be checked against primary sources before final decisions.", "Even when AI-assisted drafting or audit is used, publication relies on quality gates and human-readable evidence." ] } }