How is the interest coverage ratio defined?

The interest coverage ratio is defined as a measure of a company's ability to pay interest on its outstanding debt. It is calculated by taking a company's earnings before interest and taxes (EBIT) and dividing that by its interest expenses. This ratio indicates how easily a company can meet its interest obligations, providing insight into its financial health and risk level. A higher interest coverage ratio suggests that a company has a stronger ability to cover its interest expenses, which is crucial for investors and creditors assessing the risk of lending to or investing in the company.

The other options do not accurately describe the interest coverage ratio. Calculating debt against assets, net income to revenue, or looking at income for future investments address different financial metrics and aspects of a company's financial performance, but they do not pertain to measuring the ability to manage debt interest specifically.