HOMEPAGE

Interest Burden Ratio

Definition

The Interest Burden Ratio measures how much of a company’s operating income remains after interest expense. It is part of the DuPont profitability breakdown.

$$\text{Interest Burden}=\frac{\text{Pre‑Tax Income}}{\text{Operating Income}}$$

Why It Matters

• Shows how interest costs reduce profitability.
• Lower ratios indicate heavier debt loads or higher interest rates.
• Helps evaluate capital structure efficiency.

Interpretation

• Closer to 1.0: Minimal interest drag.
• Lower values: Interest expense significantly reduces earnings.

Example

Operating Income = $200M Pre‑Tax Income = $150M

$$\text{Interest Burden}=\frac{150}{200}=0.75$$