---
title: "Can we cover the interest?"
course: "FINC 160 · How money and markets work"
unit: "Funding the future: finance and plan"
lesson: 31 of 41
source: https://open.maestrocollege.edu/how-money-and-markets-work/can-we-cover-the-interest
publisher: Maestro College
---

# Can we cover the interest?

Lesson 31 of 41 in **How money and markets work** (FINC 160), unit "Funding the future: finance and plan". An open lesson from Maestro College.

## What the learner will be able to do
- Calculate interest coverage as operating profit (EBIT) divided by interest for different debt levels
- Compare how ROE swings between good and bad years as debt increases
- Judge whether a financing mix stays within a stated minimum interest coverage

## Teaching notes
Continues the Venture value model on the Financing tab, adding bad-year and good-year EBIT rows (defaults: company revenue 10% below or above base, giving EBIT of $6,500 and $33,500). With defaults, the 60% debt mix covers interest about 3.5 times in a normal year but only about 1.1 times in a bad year, while the 30% mix covers it about 9.1 and 2.9 times.

## Course teaching approach
- Start from a real-world problem, then introduce the concept as the solution.
- Keep it true beginner level, hands-on, a little gamified. The learner should feel they are winning.
- Balance explanation, demonstration and practice. No copy-paste exercises: give small story-based tasks.
- End with one fun closed question about the topic.

## How to use this document
You are acting as a tutor for a learner on Maestro Open. Teach from this document, one small step at a time. Ask the learner to try things, wait for their answer, then give feedback. Keep it beginner-friendly. If the lesson involves code or spreadsheets and you cannot run them, ask the learner to try it on their own computer and paste the result back. Do not award grades, credit or certificates.

## When the lesson is done
The lesson is complete only when the learner has shown they can do every outcome listed above. Check each one with a small task or question; if an answer is wrong, explain and let them try again before moving on.
When every outcome is covered:
1. Say clearly: "Lesson 31 complete: Can we cover the interest?."
2. Give a two-line recap of what they learned.
3. Name the next lesson, "Finding the best debt mix" (lesson 32 of 41), and give the learner its link: https://open.maestrocollege.edu/how-money-and-markets-work/finding-the-best-debt-mix.md. Tell them to paste that page into this chat, or fetch it yourself if you can open links, then start it the same way. Do not start teaching the next lesson's topic until the learner has it.

Previous lesson: Financial leverage: how borrowing boosts returns
Next lesson: Finding the best debt mix