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Interest Coverage
436.00 (As of Sep. 2015)

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. Broadcom Corp's Operating Income for the three months ended in Sep. 2015 was \$436 Mil. Broadcom Corp's Interest Expense for the three months ended in Sep. 2015 was \$-1 Mil. Broadcom Corp's interest coverage for the quarter that ended in Sep. 2015 was 436.00. The higher the ratio, the stronger the companys financial strength is.

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

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

 The company did not have earnings to cover the interest expense.

Else if Interest Expense is 0 and Long-Term Debt is 0, then

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

Broadcom Corp's Interest Coverage for the fiscal year that ended in Dec. 2014 is calculated as

Here, for the fiscal year that ended in Dec. 2014, Broadcom Corp's Interest Expense was \$-36 Mil. Its Operating Income was \$694 Mil. And its Long-Term Debt was \$1,593 Mil.

 Interest Coverage = -1 * Operating Income (A: Dec. 2014 ) / Interest Expense (A: Dec. 2014 ) = -1 * 694 / -36 = 19.28

Broadcom Corp's Interest Coverage for the quarter that ended in Sep. 2015 is calculated as

Here, for the three months ended in Sep. 2015, Broadcom Corp's Interest Expense was \$-1 Mil. Its Operating Income was \$436 Mil. And its Long-Term Debt was \$1,594 Mil.

 Interest Coverage = -1 * Operating Income (Q: Sep. 2015 ) / Interest Expense (Q: Sep. 2015 ) = -1 * 436 / -1 = 436

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's 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

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.