Interest coverage ratio

Good day. I hope here is an appropriate place to ask. When looking at interest coverage. Do you include bank and credit card charges as a part of interest expense?

Ideally you should just as it is increasing your cost to borrow. Also, you might wanna see how much of a difference it would make if were. To include those charges. If its too tiny, shouldn’t really matter. If its too much, wherein you may not be be able to pay off all of it, definitely include it.

I think credit card and bank charges should not be a part of interest expense which is a cost of borrowing from institutional lenders. Both these expenses should already been deducted to arrive at EBIT.

Adding to the comment of saurabh03121992

It would depend on the size of the company and how much leveraged the company is. If those charges are material expenses, then include it.

Commonly, the interest coverage ratio is more of a “pure” calculation, we just consider the interest expense and the EBIT. As mskhan91 says, those kind of charges (bank accounts fees, bank services fees, maintenance fees, credit cards fees, etc) are commonly considered “administrative expenses”, therefore already included in EBIT.