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Dell Inc (NAS:DELL)
Interest Coverage
4.69 (As of Jul. 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. Dell Inc's Operating Income for the three months ended in Jul. 2013 was $272 Mil. Dell Inc's Interest Expense for the three months ended in Jul. 2013 was $-58 Mil. Dell Inc's interest coverage for the quarter that ended in Jul. 2013 was 4.69. The higher the ratio, the stronger the company’s financial strength is.

DELL' s 10-Year Interest Coverage Range
Min: 0   Max: 0
Current: 0

DELL's Interest Coverageis ranked lower than
130% of the 1605 Companies
in the Global Computer Systems industry.

( Industry Median: 99.58 vs. DELL: 0.00 )

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

Dell 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

Dell Inc had no debt.

Dell Inc's Interest Coverage for the fiscal year that ended in Jan. 2013 is calculated as

Here, for the fiscal year that ended in Jan. 2013, Dell Inc's Interest Expense was $-270 Mil. Its Operating Income was $3,012 Mil. And its Long-Term Debt was $5,242 Mil.

Interest Coverage=-1*Operating Income (A: Jan. 2013 )/Interest Expense (A: Jan. 2013 )
=-1*3012/-270
=11.16

Dell Inc's Interest Coverage for the quarter that ended in Jul. 2013 is calculated as

Here, for the three months ended in Jul. 2013, Dell Inc's Interest Expense was $-58 Mil. Its Operating Income was $272 Mil. And its Long-Term Debt was $4,075 Mil.

Interest Coverage=-1*Operating Income (Q: Jul. 2013 )/Interest Expense (Q: Jul. 2013 )
=-1*272/-58
=4.69

* 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.

Dell Inc Annual Data

Jan04Jan05Jan06Jan07Jan08Jan09Jan10Jan11Jan12Jan13
interest_coverage 253.14280.40151.1068.2276.4434.3013.5817.2515.8811.16

Dell Inc Quarterly Data

Apr11Jul11Oct11Jan12Apr12Jul12Oct12Jan13Apr13Jul13
interest_coverage 28.8615.9216.3112.4111.9412.698.9210.913.594.69
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