medium · Corporate Credit Analysis credit-metrics

What is the primary difference between EBIT / Interest and EBITDA / Interest?

1. EBIT/Interest is always mathematically higher than EBITDA/Interest for any leveraged industrial borrower company.
2. The latter adds back non-cash depreciation and amortization, usually resulting in a higher coverage multiple.
3. The former ratio is typically preferred for banks, while the latter is more common for industrial companies.
4. EBITDA includes both interest income and other non-operating income, while EBIT always excludes it.

Sign up free to see the explanation and track your rank →