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Google Inc (NAS:GOOG)
Interest Coverage
148.96 (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. Google Inc's Operating Income for the three months ended in Sep. 2014 was $3,724 Mil. Google Inc's Interest Expense for the three months ended in Sep. 2014 was $-25 Mil. Google Inc's interest coverage for the quarter that ended in Sep. 2014 was 148.96. The higher the ratio, the stronger the company’s financial strength is.

Good Sign:

Ben Graham prefers companies interest coverage is at least 5. Google Inc has enough cash to cover all of its debt. Its financial situation is stable.

GOOG' s 10-Year Interest Coverage Range
Min: 12.24   Max: 9999.99
Current: 168.27

12.24
9999.99

During the past 13 years, the highest interest coverage of Google Inc was 9999.99. The lowest was 12.24. And the median was 2599.59.

GOOG's Interest Coverageis ranked higher than
57% of the 326 Companies
in the Global Internet Content & Information industry.

( Industry Median: 10000.00 vs. GOOG: 168.27 )

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

Google 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

Google Inc had no debt.

Google Inc's Interest Coverage for the fiscal year that ended in Dec. 2013 is calculated as

Here, for the fiscal year that ended in Dec. 2013, Google Inc's Interest Expense was $-83 Mil. Its Operating Income was $13,966 Mil. And its Long-Term Debt was $2,236 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2013 )/Interest Expense (A: Dec. 2013 )
=-1*13966/-83
=168.27

Google Inc's Interest Coverage for the quarter that ended in Sep. 2014 is calculated as

Here, for the three months ended in Sep. 2014, Google Inc's Interest Expense was $-25 Mil. Its Operating Income was $3,724 Mil. And its Long-Term Debt was $3,230 Mil.

Interest Coverage=-1*Operating Income (Q: Sep. 2014 )/Interest Expense (Q: Sep. 2014 )
=-1*3724/-25
=148.96

* 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.

Google Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
interest_coverage No Debt2,599.5913,813.21No DebtNo DebtNo Debt2,076.20202.45151.90168.27

Google Inc Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
interest_coverage 147.14130.48161.62178.48182.37197.95124.67171.46157.70148.96
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