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Cisco Systems Inc (NAS:CSCO)
Interest Coverage
14.53 (As of Oct. 2016)

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. Cisco Systems Inc's Operating Income for the six months ended in Oct. 2016 was $2,877 Mil. Cisco Systems Inc's Interest Expense for the six months ended in Oct. 2016 was $-198 Mil. Cisco Systems Inc's interest coverage for the quarter that ended in Oct. 2016 was 14.53. The higher the ratio, the stronger the company’s financial strength is.

CSCO' s Interest Coverage Range Over the Past 10 Years
Min: 12.22   Max: 29.6
Current: 17.42

12.22
29.6
CSCO's Interest Coverage is ranked lower than
68% of the 384 Companies
in the Global Communication Equipment industry.

( Industry Median: 103.06 vs. CSCO: 17.42 )

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

The company had no debt.


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

Cisco Systems Inc's Interest Coverage for the fiscal year that ended in Jul. 2015 is calculated as

Here, for the fiscal year that ended in Jul. 2015, Cisco Systems Inc's Interest Expense was $-566 Mil. Its Operating Income was $10,770 Mil. And its Long-Term Debt was $21,457 Mil.

Interest Coverage=-1*Operating Income (A: Jul. 2015 )/Interest Expense (A: Jul. 2015 )
=-1*10770/-566
=19.03

Cisco Systems Inc's Interest Coverage for the quarter that ended in Oct. 2016 is calculated as

Here, for the six months ended in Oct. 2016, Cisco Systems Inc's Interest Expense was $-198 Mil. Its Operating Income was $2,877 Mil. And its Long-Term Debt was $30,634 Mil.

Interest Coverage=-1*Operating Income (Q: Oct. 2016 )/Interest Expense (Q: Oct. 2016 )
=-1*2877/-198
=14.53

* 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

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 local exchange's currency.

Cisco Systems Inc Annual Data

Jul07Jul08Jul09Jul10Jul11Jul12Jul13Jul14Jul15Jul16
interest_coverage 22.8729.6021.1614.7112.2216.8919.2016.5719.0318.73

Cisco Systems Inc Semi-Annual Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
interest_coverage 18.8816.8518.8621.0419.3419.3620.3317.0518.3514.53
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