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Cisco Systems Inc (NAS:CSCO)
Interest Coverage
17.41 (As of Apr. 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. Cisco Systems Inc's Operating Income for the three months ended in Apr. 2014 was $2,542 Mil. Cisco Systems Inc's Interest Expense for the three months ended in Apr. 2014 was $-146 Mil. Cisco Systems Inc's interest coverage for the quarter that ended in Apr. 2014 was 17.41. The higher the ratio, the stronger the company’s financial strength is.

CSCO' s 10-Year Interest Coverage Range
Min: 12.22   Max: 9999.99
Current: 19.2

12.22
9999.99

During the past 13 years, the highest interest coverage of Cisco Systems Inc was 9999.99. The lowest was 12.22. And the median was 10000.00.

CSCO's Interest Coverageis ranked higher than
52% of the 371 Companies
in the Global Communication Equipment industry.

( Industry Median: 124.89 vs. CSCO: 19.20 )

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

Cisco Systems 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

Cisco Systems Inc had no debt.

Cisco Systems Inc's Interest Coverage for the fiscal year that ended in Jul. 2013 is calculated as

Here, for the fiscal year that ended in Jul. 2013, Cisco Systems Inc's Interest Expense was $-583 Mil. Its Operating Income was $11,196 Mil. And its Long-Term Debt was $12,928 Mil.

Interest Coverage=-1*Operating Income (A: Jul. 2013 )/Interest Expense (A: Jul. 2013 )
=-1*11196/-583
=19.20

Cisco Systems Inc's Interest Coverage for the quarter that ended in Apr. 2014 is calculated as

Here, for the three months ended in Apr. 2014, Cisco Systems Inc's Interest Expense was $-146 Mil. Its Operating Income was $2,542 Mil. And its Long-Term Debt was $20,384 Mil.

Interest Coverage=-1*Operating Income (Q: Apr. 2014 )/Interest Expense (Q: Apr. 2014 )
=-1*2542/-146
=17.41

* 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.

Cisco Systems Inc Annual Data

Jul04Jul05Jul06Jul07Jul08Jul09Jul10Jul11Jul12Jul13
interest_coverage No DebtNo DebtAt Loss22.8729.6021.1614.7112.2216.8919.20

Cisco Systems Inc Quarterly Data

Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14
interest_coverage 18.2318.2116.1317.9118.9720.2919.6817.5412.2617.41
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