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Analog Devices Inc (NAS:ADI)
Interest Coverage
32.06 (As of Apr. 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. Analog Devices Inc's Operating Income for the three months ended in Apr. 2014 was $220 Mil. Analog Devices Inc's Interest Expense for the three months ended in Apr. 2014 was $-7 Mil. Analog Devices Inc's interest coverage for the quarter that ended in Apr. 2014 was 32.06. The higher the ratio, the stronger the company’s financial strength is.

ADI' s 10-Year Interest Coverage Range
Min: 2.66   Max: 9999.99
Current: 27.79

2.66
9999.99

During the past 13 years, the highest interest coverage of Analog Devices Inc was 9999.99. The lowest was 2.66. And the median was 37.57.

ADI's Interest Coverageis ranked higher than
51% of the 552 Companies
in the Global Semiconductors industry.

( Industry Median: 767.50 vs. ADI: 27.79 )

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

Analog Devices Inc 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

Analog Devices Inc had no debt.

Analog Devices Inc's Interest Coverage for the fiscal year that ended in Oct. 2013 is calculated as

Here, for the fiscal year that ended in Oct. 2013, Analog Devices Inc's Interest Expense was $-27 Mil. Its Operating Income was $753 Mil. And its Long-Term Debt was $872 Mil.

Interest Coverage=-1*Operating Income (A: Oct. 2013 )/Interest Expense (A: Oct. 2013 )
=-1*753.075/-27.102
=27.79

Analog Devices Inc's Interest Coverage for the quarter that ended in Apr. 2014 is calculated as

Here, for the three months ended in Apr. 2014, Analog Devices Inc's Interest Expense was $-7 Mil. Its Operating Income was $220 Mil. And its Long-Term Debt was $873 Mil.

Interest Coverage=-1*Operating Income (Q: Apr. 2014 )/Interest Expense (Q: Apr. 2014 )
=-1*220.4/-6.874
=32.06

* 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.

Analog Devices Inc Annual Data

Oct04Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13
interest_coverage 3,121.9817,724.48No DebtNo DebtNo Debt69.5786.3055.9931.1927.79

Analog Devices Inc Quarterly Data

Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14
interest_coverage 27.4430.9032.9033.6823.9330.1127.1630.0127.3332.06
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