Full formBusiness & Corporate
ICRstands forInterest Coverage Ratio
Full Form of ICR
What is ICR?
The Interest Coverage Ratio (ICR) is a financial metric that measures a company's ability to meet its interest obligations on outstanding debt. It is calculated by dividing a firm's earnings before interest and taxes (EBIT) by its interest expenses. In India, ICR is widely used by banks, financial institutions, and credit rating agencies to assess the creditworthiness of businesses, especially when evaluating loan applications or corporate bonds. A higher ICR indicates stronger financial health, while a low ratio signals potential default risk. The Reserve Bank of India (RBI) often monitors ICR trends across sectors to identify systemic risks. For students preparing for competitive exams like CA, CMA, CFA, or MBA entrance tests, understanding ICR is essential as it frequently appears in financial management and ratio analysis sections. In addition, Indian companies disclose their ICR in annual reports to provide transparency to investors, and it is a key parameter in debt covenants. The ratio is also used in determining eligibility under the RBI's corporate debt restructuring framework. Overall, ICR serves as a critical tool for evaluating the financial stability of Indian enterprises in an increasingly leveraged economy.
ICR का फुल फॉर्म
ब्याज कवरेज अनुपात
Example
The bank rejected the loan application because the company's ICR dropped to 1.2, well below the minimum threshold of 2.0 set by the lender.
ICR — frequently asked questions
What is the full form of ICR?
ICR stands for Interest Coverage Ratio, a financial metric used to measure a company's ability to pay interest on its debt.
How is ICR calculated?
ICR is calculated by dividing Earnings Before Interest and Taxes (EBIT) by the interest expense for the same period.
Why is ICR important for Indian companies?
ICR helps banks and investors assess default risk and is a key criterion for loan approvals and corporate bond ratings in India.