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Family Dollar Stores Inc (NYSE:FDO)
Interest Coverage
15.18 (As of May. 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. Family Dollar Stores Inc's Operating Income for the three months ended in May. 2014 was $121 Mil. Family Dollar Stores Inc's Interest Expense for the three months ended in May. 2014 was $-8 Mil. Family Dollar Stores Inc's interest coverage for the quarter that ended in May. 2014 was 15.18. The higher the ratio, the stronger the company’s financial strength is.

FDO' s 10-Year Interest Coverage Range
Min: 22.3   Max: 9999.99
Current: 26.57

22.3
9999.99

During the past 13 years, the highest interest coverage of Family Dollar Stores Inc was 9999.99. The lowest was 22.30. And the median was 10000.00.

FDO's Interest Coverageis ranked higher than
75% of the 382 Companies
in the Global Discount Stores industry.

( Industry Median: 13.78 vs. FDO: 26.57 )

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

Family Dollar Stores 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

Family Dollar Stores Inc had no debt.

Family Dollar Stores Inc's Interest Coverage for the fiscal year that ended in Aug. 2013 is calculated as

Here, for the fiscal year that ended in Aug. 2013, Family Dollar Stores Inc's Interest Expense was $-26 Mil. Its Operating Income was $688 Mil. And its Long-Term Debt was $500 Mil.

Interest Coverage=-1*Operating Income (A: Aug. 2013 )/Interest Expense (A: Aug. 2013 )
=-1*687.957/-25.888
=26.57

Family Dollar Stores Inc's Interest Coverage for the quarter that ended in May. 2014 is calculated as

Here, for the three months ended in May. 2014, Family Dollar Stores Inc's Interest Expense was $-8 Mil. Its Operating Income was $121 Mil. And its Long-Term Debt was $484 Mil.

Interest Coverage=-1*Operating Income (Q: May. 2014 )/Interest Expense (Q: May. 2014 )
=-1*120.808/-7.959
=15.18

* 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.

Family Dollar Stores Inc Annual Data

Aug05Aug06Aug07Aug08Aug09Aug10Aug11Aug12Aug13Aug14
interest_coverage No Debt24.2322.3025.0435.3443.1628.4326.4726.5714.03

Family Dollar Stores Inc Quarterly Data

May12Aug12Nov12Feb13May13Aug13Nov13Feb14May14Aug14
interest_coverage 34.3019.8817.8332.0331.0426.2817.3819.0215.185.15
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