Fixed charge coverage

The ratio of earnings available to pay so-called fixed charges to such fixed charges. Fixed charges include interest on funded debt, including leases, plus the related amortizations of debt discount, premium, and expense. Earnings available for fixed charges may be computed before or after deducting income taxes. Occasionally credits for the "allowance for funds used during construction" are excluded from the earnings figures. The precise procedures followed in calculating fixed charge or interest coverages vary widely.