REFS is
a mine of invaluable information for the private investor.
Selecting shares without its help is like trying to
clap with one hand tied behind your back.
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Interest
cover
This
expresses a company’s ability to pay interest on borrowings
out of profits earned. It is calculated by taking the figure
for normalised pre-tax profit, adding back gross interest, and
dividing the result by gross interest.
The abbreviation
‘na’ indicates that the interest charge is nil, and interest
cover is not applicable. When the interest charge is low or
negligible, and the calculation of cover returns a very high
value, the abbreviation ‘vhi’ appears. A minus sign appears
when normalised profit before interest and tax is negative.
Calculation:
NORMALISED
PRE-TAX PROFIT + GROSS INTEREST
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= INTEREST COVER (x)
GROSS INTEREST
CHARGE
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