CFA CFA Level 2 With regard to interest coverage ratio is it EBIT/interest expense or EBIT/total interest payements?

With regard to interest coverage ratio is it EBIT/interest expense or EBIT/total interest payements?

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    • danlee28
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      The difference arose from a CFA question that I came across in the text books where in the question interest costs were capitalized for a building project. In the answers it stated that the coverage ratio does not change with respect to expensing as the ratio includes total interest payments. However in Schweser it explicting says that capitalizing interest costs increases the interest coverage ratio. This is with regard to Q8 on pg33 CFA Level II Volume 2 FRA text book.

      Thanks

    • hairyfairy
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      It should be an expense, which means that if you capitalize your payments, the coverage ratio should change.

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