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Emerson Electric Co (NYSE:EMR)
Interest Coverage
14.67 (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. Emerson Electric Co's Operating Income for the three months ended in Dec. 2013 was $792 Mil. Emerson Electric Co's Interest Expense for the three months ended in Dec. 2013 was $-54 Mil. Emerson Electric Co's interest coverage for the quarter that ended in Dec. 2013 was 14.67. The higher the ratio, the stronger the company’s financial strength is.

EMR' s 10-Year Interest Coverage Range
Min: 7.95   Max: 18.39
Current: 18.39

7.95
18.39

During the past 13 years, the highest interest coverage of Emerson Electric Co was 18.39. The lowest was 7.95. And the median was 13.15.

EMR's Interest Coverageis ranked higher than
61% of the 1267 Companies
in the Global Diversified Industrials industry.

( Industry Median: 24.23 vs. EMR: 18.39 )

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

Emerson Electric Co 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

Emerson Electric Co had no debt.

Emerson Electric Co's Interest Coverage for the fiscal year that ended in Sep. 2013 is calculated as

Here, for the fiscal year that ended in Sep. 2013, Emerson Electric Co's Interest Expense was $-234 Mil. Its Operating Income was $4,304 Mil. And its Long-Term Debt was $4,055 Mil.

Interest Coverage=-1*Operating Income (A: Sep. 2013 )/Interest Expense (A: Sep. 2013 )
=-1*4304/-234
=18.39

Emerson Electric Co's Interest Coverage for the quarter that ended in Dec. 2013 is calculated as

Here, for the three months ended in Dec. 2013, Emerson Electric Co's Interest Expense was $-54 Mil. Its Operating Income was $792 Mil. And its Long-Term Debt was $3,834 Mil.

Interest Coverage=-1*Operating Income (Q: Dec. 2013 )/Interest Expense (Q: Dec. 2013 )
=-1*792/-54
=14.67

* 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.

Emerson Electric Co Annual Data

Sep04Sep05Sep06Sep07Sep08Sep09Sep10Sep11Sep12Sep13
interest_coverage 9.6810.5313.3613.1515.4910.9411.2117.1117.9818.39

Emerson Electric Co Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
interest_coverage 21.2411.3115.0323.0422.0015.0614.3511.9532.3314.67
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