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Bank of Montreal (NYSE:BMO)
Interest Coverage
1.15 (As of Jul. 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. Bank of Montreal's Operating Income for the three months ended in Jul. 2014 was $1,216 Mil. Bank of Montreal's Interest Expense for the three months ended in Jul. 2014 was $-1,061 Mil. Bank of Montreal's interest coverage for the quarter that ended in Jul. 2014 was 1.15. The higher the ratio, the stronger the company’s financial strength is.

BMO' s 10-Year Interest Coverage Range
Min: 0.2   Max: 1.17
Current: 1.17

0.2
1.17

During the past 13 years, the highest interest coverage of Bank of Montreal was 1.17. The lowest was 0.20. And the median was 0.38.

BMO's Interest Coverageis ranked higher than
67% of the 1628 Companies
in the Global Banks - Regional - Canada industry.

( Industry Median: 1.27 vs. BMO: 1.17 )

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

Bank of Montreal 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

Bank of Montreal had no debt.

Bank of Montreal'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, Bank of Montreal's Interest Expense was $-4,374 Mil. Its Operating Income was $5,126 Mil. And its Long-Term Debt was $4,251 Mil.

Interest Coverage=-1*Operating Income (A: Oct. 2013 )/Interest Expense (A: Oct. 2013 )
=-1*5125.83412774/-4373.68922784
=1.17

Bank of Montreal's Interest Coverage for the quarter that ended in Jul. 2014 is calculated as

Here, for the three months ended in Jul. 2014, Bank of Montreal's Interest Expense was $-1,061 Mil. Its Operating Income was $1,216 Mil. And its Long-Term Debt was $3,612 Mil.

Interest Coverage=-1*Operating Income (Q: Jul. 2014 )/Interest Expense (Q: Jul. 2014 )
=-1*1215.91948765/-1061.29917658
=1.15

* 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.

Bank of Montreal Annual Data

Oct04Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13
interest_coverage 0.850.620.420.220.200.411.100.791.061.17

Bank of Montreal Quarterly Data

Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14
interest_coverage 1.090.951.011.101.091.221.16At Loss1.151.15
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