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E.I. du Pont de Nemours & Company (NYSE:DD)
Interest Coverage
2.13 (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. E.I. du Pont de Nemours & Company's Operating Income for the three months ended in Dec. 2013 was $230 Mil. E.I. du Pont de Nemours & Company's Interest Expense for the three months ended in Dec. 2013 was $-108 Mil. E.I. du Pont de Nemours & Company's interest coverage for the quarter that ended in Dec. 2013 was 2.13. The higher the ratio, the stronger the company’s financial strength is.

DD' s 10-Year Interest Coverage Range
Min: 2.2   Max: 10.36
Current: 8.79

2.2
10.36

During the past 13 years, the highest interest coverage of E.I. du Pont de Nemours & Company was 10.36. The lowest was 2.20. And the median was 7.59.

DD's Interest Coverageis ranked higher than
54% of the 660 Companies
in the Global Chemicals industry.

( Industry Median: 16.65 vs. DD: 8.79 )

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

E.I. du Pont de Nemours & Company 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

E.I. du Pont de Nemours & Company had no debt.

E.I. du Pont de Nemours & Company's Interest Coverage for the fiscal year that ended in Dec. 2013 is calculated as

Here, for the fiscal year that ended in Dec. 2013, E.I. du Pont de Nemours & Company's Interest Expense was $-448 Mil. Its Operating Income was $3,937 Mil. And its Long-Term Debt was $10,741 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2013 )/Interest Expense (A: Dec. 2013 )
=-1*3937/-448
=8.79

E.I. du Pont de Nemours & Company's Interest Coverage for the quarter that ended in Dec. 2013 is calculated as

Here, for the three months ended in Dec. 2013, E.I. du Pont de Nemours & Company's Interest Expense was $-108 Mil. Its Operating Income was $230 Mil. And its Long-Term Debt was $10,741 Mil.

Interest Coverage=-1*Operating Income (Q: Dec. 2013 )/Interest Expense (Q: Dec. 2013 )
=-1*230/-108
=2.13

* 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.

E.I. du Pont de Nemours & Company Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
interest_coverage 7.967.768.246.746.365.356.469.587.668.79

E.I. du Pont de Nemours & Company Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
interest_coverage 3.896.9215.8013.792.89At Loss15.1612.873.112.13
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