Our Financial Analysis Success Kit is Ready!
Why you should take a look at the Financial Analysis Success Kit:We've combined all our highly popular financial analysis tools into one mega-financial-analysis-kit that will save you hundreds of dollars if purchased separately. The kit contains 9 files packed with the most important financial ratio analysis tools you can find to help rocket your way to mastering financial analysis. The kit includes:
The eBook "Learn Ratio Analysis In Minutes"
The Learn Financial Ratio Analysis Excel Spreadsheet (2 versions!)
A BONUS...Our eBook of "Key Financial Statement Terms"
Another HUGE BONUS...Five-Part Financial Ratio Cheat Sheet Series
Learn more on our product page:Take a Look
Determines the ability of a company to pay debt interest and lease payments using profits from operations.[sc:kit02 ]
Fixed Charge Coverage Formula
Explanation of Fixed Charge Coverage
The Fixed Charge Coverage measures how well the company can cover the interest on its debt and its Lease Payments with its Operating Profit. Lease Payments are added back in to the Operating Profit, since were originally deducted out to get Operating Profit.
Importance of Fixed Charge Coverage
If the company you are evaluating spends heavily on leases, such as leases on buildings and equipment, then the Fixed Charge Coverage calculation is especially important. If you look closely at this calculation of Fixed Charge Coverage, you will notice that the lower the Operating Profit, the more amplified the negative affects of the Lease Payments will become. This somewhat reflects reality, as a company with declining Operating Profits will more readily feel the continual burden of Lease Payments combined with the Interest Expense.