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Computer Sciences Corporation (NYSE:CSC)
Interest Coverage
6.58 (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. Computer Sciences Corporation's Operating Income for the three months ended in Dec. 2013 was $250 Mil. Computer Sciences Corporation's Interest Expense for the three months ended in Dec. 2013 was $-38 Mil. Computer Sciences Corporation's interest coverage for the quarter that ended in Dec. 2013 was 6.58. The higher the ratio, the stronger the company’s financial strength is.

CSC' s 10-Year Interest Coverage Range
Min: 3.21   Max: 11.92
Current: 3.32

3.21
11.92

During the past 13 years, the highest interest coverage of Computer Sciences Corporation was 11.92. The lowest was 3.21. And the median was 5.36.

CSC's Interest Coverageis ranked lower than
62% of the 1077 Companies
in the Global Information Technology Services industry.

( Industry Median: 403.68 vs. CSC: 3.32 )

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

Computer Sciences Corporation 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

Computer Sciences Corporation had no debt.

Computer Sciences Corporation's Interest Coverage for the fiscal year that ended in Mar. 2013 is calculated as

Here, for the fiscal year that ended in Mar. 2013, Computer Sciences Corporation's Interest Expense was $-183 Mil. Its Operating Income was $607 Mil. And its Long-Term Debt was $2,498 Mil.

Interest Coverage=-1*Operating Income (A: Mar. 2013 )/Interest Expense (A: Mar. 2013 )
=-1*607/-183
=3.32

Computer Sciences Corporation's Interest Coverage for the quarter that ended in Dec. 2013 is calculated as

Here, for the three months ended in Dec. 2013, Computer Sciences Corporation's Interest Expense was $-38 Mil. Its Operating Income was $250 Mil. And its Long-Term Debt was $2,184 Mil.

Interest Coverage=-1*Operating Income (Q: Dec. 2013 )/Interest Expense (Q: Dec. 2013 )
=-1*250/-38
=6.58

* 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.

Computer Sciences Corporation Annual Data

Mar04Mar05Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13
interest_coverage 4.404.567.883.464.953.644.125.76At Loss3.32

Computer Sciences Corporation Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
interest_coverage At LossAt LossAt Loss1.644.492.726.316.157.716.58
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