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Clorox Co (NYSE:CLX)
Interest Coverage
9.50 (As of Sep. 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. Clorox Co's Operating Income for the three months ended in Sep. 2014 was $247 Mil. Clorox Co's Interest Expense for the three months ended in Sep. 2014 was $-26 Mil. Clorox Co's interest coverage for the quarter that ended in Sep. 2014 was 9.50. The higher the ratio, the stronger the company’s financial strength is.

CLX' s 10-Year Interest Coverage Range
Min: 5.05   Max: 25.96
Current: 9.38

5.05
25.96

During the past 13 years, the highest interest coverage of Clorox Co was 25.96. The lowest was 5.05. And the median was 7.39.

CLX's Interest Coverageis ranked higher than
59% of the 1082 Companies
in the Global Household & Personal Products industry.

( Industry Median: 16.77 vs. CLX: 9.38 )

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

Clorox Co 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

Clorox Co had no debt.

Clorox Co's Interest Coverage for the fiscal year that ended in Jun. 2014 is calculated as

Here, for the fiscal year that ended in Jun. 2014, Clorox Co's Interest Expense was $-103 Mil. Its Operating Income was $966 Mil. And its Long-Term Debt was $1,595 Mil.

Interest Coverage=-1*Operating Income (A: Jun. 2014 )/Interest Expense (A: Jun. 2014 )
=-1*966/-103
=9.38

Clorox Co's Interest Coverage for the quarter that ended in Sep. 2014 is calculated as

Here, for the three months ended in Sep. 2014, Clorox Co's Interest Expense was $-26 Mil. Its Operating Income was $247 Mil. And its Long-Term Debt was $1,596 Mil.

Interest Coverage=-1*Operating Income (Q: Sep. 2014 )/Interest Expense (Q: Sep. 2014 )
=-1*247/-26
=9.50

* 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.

Clorox Co Annual Data

Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14
interest_coverage 9.946.137.565.076.207.835.367.227.999.38

Clorox Co Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
interest_coverage 8.736.886.427.7711.659.087.819.9610.699.50
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