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ConAgra Foods, Inc. (NYSE:CAG)
Interest Coverage
4.45 (As of Feb. 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. ConAgra Foods, Inc.'s Operating Income for the three months ended in Feb. 2014 was $425 Mil. ConAgra Foods, Inc.'s Interest Expense for the three months ended in Feb. 2014 was $-95 Mil. ConAgra Foods, Inc.'s interest coverage for the quarter that ended in Feb. 2014 was 4.45. The higher the ratio, the stronger the company’s financial strength is.

CAG' s 10-Year Interest Coverage Range
Min: 2.57   Max: 6.39
Current: 5.11

2.57
6.39

During the past 13 years, the highest interest coverage of ConAgra Foods, Inc. was 6.39. The lowest was 2.57. And the median was 4.02.

CAG's Interest Coverageis ranked higher than
52% of the 902 Companies
in the Global Packaged Foods industry.

( Industry Median: 16.21 vs. CAG: 5.11 )

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

ConAgra Foods, 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

ConAgra Foods, Inc. had no debt.

ConAgra Foods, Inc.'s Interest Coverage for the fiscal year that ended in May. 2013 is calculated as

Here, for the fiscal year that ended in May. 2013, ConAgra Foods, Inc.'s Interest Expense was $-279 Mil. Its Operating Income was $1,424 Mil. And its Long-Term Debt was $8,887 Mil.

Interest Coverage=-1*Operating Income (A: May. 2013 )/Interest Expense (A: May. 2013 )
=-1*1424.4/-278.6
=5.11

ConAgra Foods, Inc.'s Interest Coverage for the quarter that ended in Feb. 2014 is calculated as

Here, for the three months ended in Feb. 2014, ConAgra Foods, Inc.'s Interest Expense was $-95 Mil. Its Operating Income was $425 Mil. And its Long-Term Debt was $8,761 Mil.

Interest Coverage=-1*Operating Income (Q: Feb. 2014 )/Interest Expense (Q: Feb. 2014 )
=-1*425/-95.4
=4.45

* 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.

ConAgra Foods, Inc. Annual Data

May04May05May06May07May08May09May10May11May12May13
interest_coverage 3.963.552.574.19At Loss5.905.066.393.995.11

ConAgra Foods, Inc. Quarterly Data

Nov11Feb12May12Aug12Nov12Feb13May13Aug13Nov13Feb14
interest_coverage 6.128.48At Loss8.356.803.633.692.824.604.45
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