Switch to:
Emerson Electric Co (NYSE:EMR)
Interest Coverage
24.34 (As of Sep. 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. Emerson Electric Co's Operating Income for the three months ended in Sep. 2014 was $1,436 Mil. Emerson Electric Co's Interest Expense for the three months ended in Sep. 2014 was $-59 Mil. Emerson Electric Co's interest coverage for the quarter that ended in Sep. 2014 was 24.34. The higher the ratio, the stronger the company’s financial strength is.

EMR' s 10-Year Interest Coverage Range
Min: 7.95   Max: 20.38
Current: 20.38

7.95
20.38

During the past 13 years, the highest interest coverage of Emerson Electric Co was 20.38. The lowest was 7.95. And the median was 13.26.

EMR's Interest Coverageis ranked higher than
60% of the 1336 Companies
in the Global Diversified Industrials industry.

( Industry Median: 31.40 vs. EMR: 20.38 )

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. 2014 is calculated as

Here, for the fiscal year that ended in Sep. 2014, Emerson Electric Co's Interest Expense was $-218 Mil. Its Operating Income was $4,443 Mil. And its Long-Term Debt was $3,559 Mil.

Interest Coverage=-1*Operating Income (A: Sep. 2014 )/Interest Expense (A: Sep. 2014 )
=-1*4443/-218
=20.38

Emerson Electric Co's Interest Coverage for the quarter that ended in Sep. 2014 is calculated as

Here, for the three months ended in Sep. 2014, Emerson Electric Co's Interest Expense was $-59 Mil. Its Operating Income was $1,436 Mil. And its Long-Term Debt was $3,559 Mil.

Interest Coverage=-1*Operating Income (Q: Sep. 2014 )/Interest Expense (Q: Sep. 2014 )
=-1*1436/-59
=24.34

* 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

Sep05Sep06Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14
interest_coverage 10.5313.3613.1515.4910.8111.2115.6715.5218.3920.38

Emerson Electric Co Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
interest_coverage 22.6313.5414.0214.3511.9532.3314.6719.6323.8024.34
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK