Interest Coverage Ratios: Assessing Vulnerabilities in Nonfinancial Corporate Credit
Posted: 13 Dec 2020
Date Written: December 3, 2020
This note examines whether the ability of nonfinancial corporations to meet their interest expenses out of earnings is a vulnerability for financial stability under current economic conditions. We measure this ability using the interest coverage ratio (ICR)—the ratio of earnings before interest and taxes relative to interest expenses—and project this ratio under different scenarios.
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