Interest Coverage Ratio is a financial metric used to evaluate a company's ability to pay interest expenses on outstanding debt. It measures the extent to which a company's earnings can cover its interest obligations.

The formula for interest coverage ratio is:

Interest Coverage Ratio = Earnings Before Interest and Taxes (EBIT) / Interest Expense

A high interest coverage ratio generally indicates that a company has strong earnings and can easily meet its interest payments. A low interest coverage ratio indicates that a company may struggle to pay its interest expenses.

Fundamental Analysis uses Interest Coverage Ratio as one of the key financial ratios to assess a company's financial health and viability. It is often used by investors and analysts to determine whether a company is a good investment opportunity. A high interest coverage ratio generally indicates a financially stable company, while a low interest coverage ratio can be a red flag for potential investors, as it can signal that the company may be at a higher risk of defaulting on their debt.