A ratio used to determine how easily a company can pay interest on outstanding debt. The lower the ratio, the more the company is burdened by debt expense. When a company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. An interest coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy interest expenses.
If the ratio is under 1, it means that the company is having problems generating enough cash flow to pay its interest expenses. Ideally the ratio should be over 1.5.
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