Financial Glossary
Fixed-Charge Coverage Ratio (FCCR)
The fixed-charge coverage ratio (FCCR) measures a business's ability to cover its recurring fixed obligations from earnings before interest and taxes, typically including not just principal and interest but also lease payments and other contractual charges. It is calculated by dividing earnings available for fixed charges by the total fixed charges due in a period. A ratio above 1.0 indicates earnings are sufficient to meet those obligations.
Problem & Application
FCCR is a broader cousin of the debt-service coverage ratio (DSCR): DSCR usually looks only at loan principal and interest, while FCCR folds in leases and other fixed commitments. For a campground or RV-park operator who leases equipment or land in addition to carrying mortgage debt, FCCR gives a truer picture of how much cushion the business has before fixed costs eat into cash flow. Lenders and landlords often set minimum FCCR covenants, so tracking it helps owners stay onside of loan agreements.
In Short
FCCR tells owners and lenders whether ongoing earnings comfortably cover every fixed commitment, not just debt, making it a stricter solvency test than DSCR alone.