What Is a Fixed Overhead?

Economic management term, the symmetry of "variable expenses". Expenses that do not change in the short term with changes in the output (workload) of the enterprise (or a single project, a single piece of equipment), such as depreciation costs for fixed assets. F is commonly used in English.

Fixed costs

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Fixed-cost guarantee multiples are taken into account

Fixed fee coverage multiples = (profit before tax and interest payments + lease debt) / (total interest expense + lease debt)

The use of the guarantee multiple indicator The fixed fee guarantee multiple indicator reflects the long-term debt repayment ability of the enterprise, taking into account all long-term debt. The fixed cost guarantee multiple must be at least equal to 1, otherwise it means that the enterprise cannot pay the long-term debt due to the enterprise. The higher this indicator, the stronger the company's ability to pay debts.

Obviously, the lack of ability to repay fixed operating expenses will threaten the operation of the enterprise and make it difficult for the enterprise to maintain a sound state of operation. Many agreements on operating capital clearly stipulate that companies must maintain a fixed fee protection multiple ratio at a certain level. This provision guarantees that the borrower will be paid.