There are 2 calculations for this: 1. EBIT/ interest expense 2. (CFO + interest paid + taxes paid)/ interest paid Can anyone explain?
EBIT= CFO + Interest Paid + Taxes EBIT = Earnings before Interest and Tax
Sure, they look quite similar. It just the first is using the balance sheet items to calculate the interest coverage ratio. Similarly, the second one is using the cash flow items to cal interest coverage. If you look at EBIT, it is the operating income from BS, and for CFO + interest paid and taxes paid, it is the operating income in terms of cash flow plus interest and taxes (similiarly before interests and taxes in E-“BIT”).