The KCP

Can KCP service its debt comfortably? With a debt-to-equity ratio of 63%, KCP can be considered as an above-average leveraged company. This is somewhat unusual for small-caps companies, since lenders are often hesitant to provide attractive interest rates to less-established businesses. We can test if KCP's debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For KCP, the ratio of 4.49x suggests that interest is appropriately covered, which means that debtors may be willing to loan the company more money, giving KCP ample headroom to grow its debt facilities.