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Esterline Technologies (NYSE:ESL)
Interest Coverage
7.45 (As of Jul. 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. Esterline Technologies's Operating Income for the three months ended in Jul. 2014 was $59 Mil. Esterline Technologies's Interest Expense for the three months ended in Jul. 2014 was $-8 Mil. Esterline Technologies's interest coverage for the quarter that ended in Jul. 2014 was 7.45. The higher the ratio, the stronger the company’s financial strength is.

ESL' s 10-Year Interest Coverage Range
Min: 2.47   Max: 12.95
Current: 6

2.47
12.95

During the past 13 years, the highest interest coverage of Esterline Technologies was 12.95. The lowest was 2.47. And the median was 5.28.

ESL's Interest Coverageis ranked higher than
71% of the 200 Companies
in the Global Aerospace & Defense industry.

( Industry Median: 13.99 vs. ESL: 6.00 )

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

Esterline Technologies 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

Esterline Technologies had no debt.

Esterline Technologies's Interest Coverage for the fiscal year that ended in Oct. 2013 is calculated as

Here, for the fiscal year that ended in Oct. 2013, Esterline Technologies's Interest Expense was $-40 Mil. Its Operating Income was $238 Mil. And its Long-Term Debt was $668 Mil.

Interest Coverage=-1*Operating Income (A: Oct. 2013 )/Interest Expense (A: Oct. 2013 )
=-1*237.923/-39.667
=6.00

Esterline Technologies's Interest Coverage for the quarter that ended in Jul. 2014 is calculated as

Here, for the three months ended in Jul. 2014, Esterline Technologies's Interest Expense was $-8 Mil. Its Operating Income was $59 Mil. And its Long-Term Debt was $628 Mil.

Interest Coverage=-1*Operating Income (Q: Jul. 2014 )/Interest Expense (Q: Jul. 2014 )
=-1*58.641/-7.87
=7.45

* 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.

Esterline Technologies Annual Data

Oct04Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13
interest_coverage 2.914.534.294.075.495.075.674.924.096.00

Esterline Technologies Quarterly Data

Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14
interest_coverage 5.910.177.433.705.005.4710.625.316.527.45
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