`"Fixed Charge Coverage Ratio" = ( "EBIT" + "Fixed Charges before taxes" )/ ( "Fixed Charges before taxes" + "Interest Expense " )`

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The Fixed Charge Coverage Ratio (FCCR) is used to compute how many times a firm can pay its fixed costs with its income before interest and taxes.

A higher FCCR is preferred because it indicates a healthier and less risky business to invest in or loan to. A lower FCCR is a turnoff for creditors and investors because it indicates that the business can barely meet its monthly bills.