It may be calculated as either EBIT or EBITDA divided by the total interest expense.
The company would then have to either use cash on hand to make up the difference or borrow funds.
Typically, it is a warning sign when interest coverage falls below 2.5x.
A lower times interest earned ratio means less earnings are available to meet interest payments and that the business is more vulnerable to increases in interest rates and being unable to meet their existing outstanding loan obligations.
EBITDA considered to be a better measure of Interest Coverage ratio.