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BHP Billiton Ltd (NYSE:BHP)
Interest Coverage
48.08 (As of Dec. 2013)

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. BHP Billiton Ltd's Operating Income for the six months ended in Dec. 2013 was $12,933 Mil. BHP Billiton Ltd's Interest Expense for the six months ended in Dec. 2013 was $-269 Mil. BHP Billiton Ltd's interest coverage for the quarter that ended in Dec. 2013 was 48.08. The higher the ratio, the stronger the company’s financial strength is.

BHP' s 10-Year Interest Coverage Range
Min: 0.35   Max: 129.33
Current: 25.36

0.35
129.33

During the past 13 years, the highest interest coverage of BHP Billiton Ltd was 129.33. The lowest was 0.35. And the median was 14.27.

BHP's Interest Coverageis ranked higher than
62% of the 1434 Companies
in the Global Industrial Metals & Minerals industry.

( Industry Median: 10000.00 vs. BHP: 25.36 )

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

BHP Billiton 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

BHP Billiton Ltd had no debt.

BHP Billiton Ltd's Interest Coverage for the fiscal year that ended in Jun. 2013 is calculated as

Here, for the fiscal year that ended in Jun. 2013, BHP Billiton Ltd's Interest Expense was $-758 Mil. Its Operating Income was $19,225 Mil. And its Long-Term Debt was $29,847 Mil.

Interest Coverage=-1*Operating Income (A: Jun. 2013 )/Interest Expense (A: Jun. 2013 )
=-1*19225/-758
=25.36

BHP Billiton Ltd's Interest Coverage for the quarter that ended in Dec. 2013 is calculated as

Here, for the six months ended in Dec. 2013, BHP Billiton Ltd's Interest Expense was $-269 Mil. Its Operating Income was $12,933 Mil. And its Long-Term Debt was $31,702 Mil.

Interest Coverage=-1*Operating Income (Q: Dec. 2013 )/Interest Expense (Q: Dec. 2013 )
=-1*12933/-269
=48.08

* 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.

BHP Billiton Ltd Annual Data

Jun04Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13
interest_coverage 8.1842.9219.1225.4226.7914.2729.72129.3353.8625.36

BHP Billiton Ltd Semi-Annual Data

Jun09Dec09Jun10Dec10Jun11Dec11Jun12Dec12Jun13Dec13
interest_coverage 14.7126.5932.9629.68No Debt32.69No Debt28.3623.6048.08
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