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Darden Restaurants Inc (NYSE:DRI)
Interest Coverage
2.66 (As of Feb. 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. Darden Restaurants Inc's Operating Income for the three months ended in Feb. 2016 was $221 Mil. Darden Restaurants Inc's Interest Expense for the three months ended in Feb. 2016 was $-83 Mil. Darden Restaurants Inc's interest coverage for the quarter that ended in Feb. 2016 was 2.66. The higher the ratio, the stronger the company’s financial strength is.

DRI' s Interest Coverage Range Over the Past 10 Years
Min: 1.91   Max: 14.09
Current: 3.15

1.91
14.09
DRI's Interest Coverage is ranked lower than
85% of the 241 Companies
in the Global Restaurants industry.

( Industry Median: 16.40 vs. DRI: 3.15 )

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.

Darden Restaurants Inc's Interest Coverage for the fiscal year that ended in May. 2015 is calculated as

Here, for the fiscal year that ended in May. 2015, Darden Restaurants Inc's Interest Expense was $-193 Mil. Its Operating Income was $368 Mil. And its Long-Term Debt was $1,452 Mil.

Interest Coverage=-1*Operating Income (A: May. 2015 )/Interest Expense (A: May. 2015 )
=-1*367.6/-192.9
=1.91

Darden Restaurants Inc's Interest Coverage for the quarter that ended in Feb. 2016 is calculated as

Here, for the three months ended in Feb. 2016, Darden Restaurants Inc's Interest Expense was $-83 Mil. Its Operating Income was $221 Mil. And its Long-Term Debt was $440 Mil.

Interest Coverage=-1*Operating Income (Q: Feb. 2016 )/Interest Expense (Q: Feb. 2016 )
=-1*221.2/-83.1
=2.66

* 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.

Darden Restaurants Inc Annual Data

May06May07May08May09May10May11May12May13May14May15
interest_coverage 11.3714.097.015.726.707.896.955.112.431.91

Darden Restaurants Inc Quarterly Data

Nov13Feb14May14Aug14Nov14Feb15May15Aug15Nov15Feb16
interest_coverage 1.063.691.920.61At Loss7.316.275.991.432.66
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