Switch to:
Brown-Forman Corp (NYSE:BF.B)
Interest Coverage
31.33 (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. Brown-Forman Corp's Operating Income for the three months ended in Apr. 2014 was $188 Mil. Brown-Forman Corp's Interest Expense for the three months ended in Apr. 2014 was $-6 Mil. Brown-Forman Corp's interest coverage for the quarter that ended in Apr. 2014 was 31.33. The higher the ratio, the stronger the company’s financial strength is.

BF.B' s 10-Year Interest Coverage Range
Min: 11.85   Max: 46.5
Current: 37.35

11.85
46.5

During the past 13 years, the highest interest coverage of Brown-Forman Corp was 46.50. The lowest was 11.85. And the median was 23.05.

BF.B's Interest Coverageis ranked higher than
74% of the 155 Companies
in the Global Beverages - Wineries & Distilleries industry.

( Industry Median: 7.86 vs. BF.B: 37.35 )

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

Brown-Forman Corp 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

Brown-Forman Corp had no debt.

Brown-Forman Corp's Interest Coverage for the fiscal year that ended in Apr. 2014 is calculated as

Here, for the fiscal year that ended in Apr. 2014, Brown-Forman Corp's Interest Expense was $-26 Mil. Its Operating Income was $971 Mil. And its Long-Term Debt was $997 Mil.

Interest Coverage=-1*Operating Income (A: Apr. 2014 )/Interest Expense (A: Apr. 2014 )
=-1*971/-26
=37.35

Brown-Forman Corp's Interest Coverage for the quarter that ended in Apr. 2014 is calculated as

Here, for the three months ended in Apr. 2014, Brown-Forman Corp's Interest Expense was $-6 Mil. Its Operating Income was $188 Mil. And its Long-Term Debt was $997 Mil.

Interest Coverage=-1*Operating Income (Q: Apr. 2014 )/Interest Expense (Q: Apr. 2014 )
=-1*188/-6
=31.33

* 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.

Brown-Forman Corp Annual Data

Apr05Apr06Apr07Apr08Apr09Apr10Apr11Apr12Apr13Apr14
interest_coverage 22.2531.2817.7113.9817.8622.9029.4825.4224.9437.35

Brown-Forman Corp Quarterly Data

Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14
interest_coverage 26.1020.2344.4052.4026.3310.4131.0044.4342.5031.33
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
Email Hide