Switch to:
Arch Capital Group Ltd (NAS:ACGL)
Interest Coverage
55.33 (As of Sep. 2014)

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 (EBIT) by its Interest Expense. Arch Capital Group Ltd's Operating Income for the three months ended in Sep. 2014 was $230 Mil. Arch Capital Group Ltd's Interest Expense for the three months ended in Sep. 2014 was $-4 Mil. Arch Capital Group Ltd's interest coverage for the quarter that ended in Sep. 2014 was 55.33. The higher the ratio, the stronger the company’s financial strength is.

ACGL' s 10-Year Interest Coverage Range
Min: 12.77   Max: 9999.99
Current: 27.44

12.77
9999.99

During the past 13 years, the highest interest coverage of Arch Capital Group Ltd was 9999.99. The lowest was 12.77. And the median was 127.56.

ACGL's Interest Coverageis ranked higher than
73% of the 74 Companies
in the Global Insurance - Reinsurance industry.

( Industry Median: 20.31 vs. ACGL: 27.44 )

Definition

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 (EBIT) by its Interest Expense:

If Interest Expense is negative and Operating Income is positive, then

Interest Coverage=-1*Operating Income/Interest Expense

Else if Interest Expense is negative and Operating Income is negative, then

Arch Capital Group Ltd did not have earnings to cover the interest expense.

Else if Interest Expense is 0 and Long-Term Debt is 0, or Interest Expense is positive, then

Arch Capital Group Ltd had no debt.

Arch Capital Group Ltd's Interest Coverage for the fiscal year that ended in Dec. 2013 is calculated as

Here, for the fiscal year that ended in Dec. 2013, Arch Capital Group Ltd's Interest Expense was $-27 Mil. Its Operating Income was $743 Mil. And its Long-Term Debt was $900 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2013 )/Interest Expense (A: Dec. 2013 )
=-1*742.505/-27.06
=27.44

Arch Capital Group Ltd's Interest Coverage for the quarter that ended in Sep. 2014 is calculated as

Here, for the three months ended in Sep. 2014, Arch Capital Group Ltd's Interest Expense was $-4 Mil. Its Operating Income was $230 Mil. And its Long-Term Debt was $900 Mil.

Interest Coverage=-1*Operating Income (Q: Sep. 2014 )/Interest Expense (Q: Sep. 2014 )
=-1*229.71/-4.152
=55.33

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

The higher the ratio, the stronger the company’s financial strength is.


Explanation

Ben Graham requires that a company has a minimum interest coverage of 5 with the companies he invested. If the interest coverage is less than 2, the company is burdened by debt. Any business slow or recession may drag the company into a situation where it cannot pay the interest on its debt.

Interest Coverage is an important factor when GuruFocus ranks a company’s overage financial strength.


Related Terms

Operating Income, Interest Expense, Financial Strength


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Arch Capital Group Ltd Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
interest_coverage 20.0913.6834.49At Loss12.7736.7328.3413.4520.6627.44

Arch Capital Group Ltd Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
interest_coverage 29.7126.441.1544.3131.1020.5918.8812.7015.2855.33
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK