Fixed Charges

Definition: Fixed Charges are the recurring contractual obligations a company must pay regardless of operating performance. The classic credit-analysis definit…

Fixed Charges are the recurring contractual obligations a company must pay regardless of operating performance. The classic credit-analysis definition includes Interest Expense plus Lease Payments (operating and finance), and may also include Preferred Dividends grossed up for taxes, principal repayments under debt service, and other contractual fixed obligations. Fixed Charges appear in the denominator of the Fixed Charge Coverage Ratio (FCCR), which measures how many times a company can cover its fixed obligations from its earnings before fixed charges and taxes.