Cash Interest Coverage
Calculate the cash interest coverage ratio, the number of times the operating cash flow before interest and taxes covers the interest paid in cash.
Where the interest coverage compares accrual figures (earnings with the interest expense), this ratio compares cash with cash, so it is not flattered by earnings that are not received in cash or by interest that is accrued (payment-in-kind debt) rather than paid.
The formula is as follows:
\[\text{Cash Interest Coverage} = (\text{Cash Flow from Operations} + \text{Interest Paid} + \text{Income Taxes Paid}) / \text{Interest Paid}\]Under US GAAP the interest and taxes paid are part of the cash flow from operations, so they are added back. IFRS lets companies report the interest paid under financing activities instead, in which case adding it back overstates the coverage by one. A zero or unreported interest paid gives NaN.
Also known as: cash flow interest coverage, CFO interest coverage, cash coverage ratio.
Cash Interest Coverage in Python or via the MCP
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_cash_interest_coverage_ratio as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(
["T", "UNP", "HSY"],
api_key="FINANCIAL_MODELING_PREP_KEY",
start_date="2021-01-01",
end_date="2025-12-31",
)
toolkit.ratios.get_cash_interest_coverage_ratio()
Or, after setting up the Finance Toolkit MCP, ask:
How many times did the operating cash flow of AT&T, Union Pacific and Hershey cover the interest they paid from 2021 to 2025?
Which returns:
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| HSY | 19.4618 | 20.3474 | 17.3451 | 16.2044 | 13.3412 |
| T | 6.6391 | 5.1965 | 6.4156 | 6.7806 | nan |
| UNP | 10.8344 | 10.8806 | 8.78 | 9.481 | 8.5004 |
Parameters
get_cash_interest_coverage_ratio accepts the following parameters.
| Parameter | Type | Description | Example |
|---|---|---|---|
rounding | int | None | The number of decimals to round the results to. Defaults to None, which uses the rounding of the Toolkit (4 unless set otherwise). | 2 |
growth | bool | Whether to calculate the growth of the ratios. Defaults to False. | True |
lag | int | list[int] | The lag to use for the growth calculation. Defaults to 1. | 4 |
compound | bool | Whether the growth is the compound annual growth rate over the lag (e.g. lag=5 for the five-year CAGR) instead of the total change. Defaults to False. | False |
standardize | bool | Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False. | True |
trailing | int | The number of periods to sum flows (income and cash flow statement items) over. E.g. 4 with quarterly data gives the trailing twelve months (TTM) and 3 with annual data a three-year cumulative figure. Defaults to None, which uses single-period flows. | 4 |