fixed-charge coverage

fixed-charge coverage definition - business

fixed-charge coverage

The number of times that a firm's operating income exceeds its fixed payments. Fixed-charge coverage is a measure of a firm's ability to meet contractually fixed payments, with high coverage indicating significant flexibility for making payments in the event that business conditions deteriorate and earnings decline. Expenses used in calculating fixed-charge coverage usually include interest, lease payments, preferred dividends, and principal payments on debt. Also called times fixed charges. Compare interest coverage.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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