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Accenture PLC (NYSE:ACN)
Interest Coverage
274.77 (As of May. 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. Accenture PLC's Operating Income for the three months ended in May. 2014 was $1,179 Mil. Accenture PLC's Interest Expense for the three months ended in May. 2014 was $-4 Mil. Accenture PLC's interest coverage for the quarter that ended in May. 2014 was 274.77. The higher the ratio, the stronger the company’s financial strength is.

Good Sign:

Ben Graham prefers companies interest coverage is at least 5. Accenture PLC has enough cash to cover all of its debt. Its financial situation is stable.

ACN' s 10-Year Interest Coverage Range
Min: 16.08   Max: 309.13
Current: 309.13

16.08
309.13

During the past 13 years, the highest interest coverage of Accenture PLC was 309.13. The lowest was 16.08. And the median was 93.82.

ACN's Interest Coverageis ranked higher than
64% of the 1129 Companies
in the Global Information Technology Services industry.

( Industry Median: 759.74 vs. ACN: 309.13 )

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

Accenture PLC 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

Accenture PLC had no debt.

Accenture PLC's Interest Coverage for the fiscal year that ended in Aug. 2013 is calculated as

Here, for the fiscal year that ended in Aug. 2013, Accenture PLC's Interest Expense was $-14 Mil. Its Operating Income was $4,339 Mil. And its Long-Term Debt was $26 Mil.

Interest Coverage=-1*Operating Income (A: Aug. 2013 )/Interest Expense (A: Aug. 2013 )
=-1*4338.68/-14.035
=309.13

Accenture PLC's Interest Coverage for the quarter that ended in May. 2014 is calculated as

Here, for the three months ended in May. 2014, Accenture PLC's Interest Expense was $-4 Mil. Its Operating Income was $1,179 Mil. And its Long-Term Debt was $27 Mil.

Interest Coverage=-1*Operating Income (Q: May. 2014 )/Interest Expense (Q: May. 2014 )
=-1*1178.766/-4.29
=274.77

* 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.

Accenture PLC Annual Data

Aug04Aug05Aug06Aug07Aug08Aug09Aug10Aug11Aug12Aug13
interest_coverage 79.7888.0787.0699.56132.65187.23198.60231.36257.06309.13

Accenture PLC Quarterly Data

Feb12May12Aug12Nov12Feb13May13Aug13Nov13Feb14May14
interest_coverage 210.73303.33295.15230.53319.84318.28435.76298.28218.79274.77
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