A bad interest coverage ratio is any number below 1, as this translates to the company’s current earnings being insufficient to service its outstanding debt.
In this post
What is a good interest coverage ratio?
It means the company is financially stable. Ideal interest coverage ratio is 3 and above. Whereas 1.5 is the minimum acceptable ratio. A ratio of less than 1 is a red flag for investors.
What if interest coverage ratio is less than 1?
A bad interest coverage ratio is any number below one as this means that the company’s current earnings are insufficient to service its outstanding debt.
Is a high interest coverage ratio good?
Intuitively, a lower ratio indicates that less operating profits are available to meet interest payments and that the company is more vulnerable to volatile interest rates. Therefore, a higher interest coverage ratio indicates stronger financial health – the company is more capable of meeting interest obligations.
What does interest coverage ratio of 6 indicate?
If the interest coverage ratio is 6, this means the ability to pay the interest on the debt 6 times in an accounting year.
What is the importance of interest coverage ratio?
Interest coverage ratio serves as a solvency check for an organization. It allows investors, financial institutions and the market to understand the current ability of the firm to pay accumulated debts. It is also used to assess the profitability of the firm.
How can interest cover ratio be improved?
Considering the two elements that go into calculating the ratio–Operating Profit and Debt Interest–the interest cover could be improved in two main ways: 1. Increase earnings before interest and tax through, for example, generating more revenue and/or managing costs better. 2.
What is Nike’s interest coverage ratio?
Analysis. NIKE’s latest twelve months interest coverage ratio is 22.3x. NIKE’s interest coverage ratio for fiscal years ending May 2018 to 2022 averaged 27.9x. NIKE’s operated at median interest coverage ratio of 24.4x from fiscal years ending May 2018 to 2022.
What is Apple’s interest coverage ratio?
: 32.09 (As of Jun. View and export this data going back to 1980. Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company’s Operating Income by its Interest Expense.
Should the interest coverage ratio be negative?
Any value below one is a negative interest coverage ratio. This indicates that the company’s existing revenues are inadequate to repay its existing debt. If it is less than 1.5 shows the prospects of a company being able to fulfils its interest expenses on a continuous basis are still questionable.
What can cause a reduction in interest cover?
There are multiple reasons a company’s interest coverage ratio can deteriorate. If a company that has high operating leverage (high fixed costs compared to variable costs) experiences a sustained drop in sales, its operating income will shrink, deteriorating its interest coverage ratio.
What is a good debt to equity ratio for NIKE?
1 Nike’s capital structure has high equity capital relative to debt, with a debt-to-equity ratio of 0.66, though this figure rose sharply in 2020 due to store closures.
Does NIKE have debt?
Nike reported $9.43B in Debt for its first fiscal quarter of 2022.
Is NIKE a solvent company?
A solvency ratio calculated as total debt divided by total assets. Nike Inc. debt to assets ratio improved from 2020 to 2021 and from 2021 to 2022. A solvency ratio calculated as total debt (including operating lease liability) divided by total assets.
How do you calculate interest coverage ratio?
The interest coverage ratio is calculated by dividing earnings before interest and taxes (EBIT) by the total amount of interest expense on all of the company’s outstanding debts. A company’s debt can include lines of credit, loans, and bonds.
What is Apple’s Roe?
About Return on Equity (TTM)
Apple Inc.’s return on equity, or ROE, is 152.97% compared to the ROE of the Computer – Mini computers industry of 18.56%. While this shows that AAPL makes good use of its equity, this metric will vary significantly from industry to industry.
What is Apple’s debt to equity ratio?
The debt/equity ratio can be defined as a measure of a company’s financial leverage calculated by dividing its long-term debt by stockholders’ equity. Apple debt/equity for the three months ending June 30, 2022 was 1.63.
Can interest coverage be misleading?
On the other hand, the new start-up company will struggle to get a loan and it even faces a high-interest rate. Due to these issues, the interest coverage ratio will be misleading if we compare it across different industries.