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Halliburton Co (NYSE:HAL)
Interest Coverage
0.42 (As of Sep. 2015)

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. Halliburton Co's Operating Income for the three months ended in Sep. 2015 was $43 Mil. Halliburton Co's Interest Expense for the three months ended in Sep. 2015 was $-102 Mil. Halliburton Co's interest coverage for the quarter that ended in Sep. 2015 was 0.42. The higher the ratio, the stronger the company’s financial strength is.

During the past 13 years, the highest interest coverage of Halliburton Co was 24.01. The lowest was 6.88. And the median was 13.26.


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

The company did not have earnings to cover the interest expense.

Else if Interest Expense is 0 and Long-Term Debt is 0, then

The company had no debt.

Halliburton Co's Interest Coverage for the fiscal year that ended in Dec. 2014 is calculated as

Here, for the fiscal year that ended in Dec. 2014, Halliburton Co's Interest Expense was $-396 Mil. Its Operating Income was $5,097 Mil. And its Long-Term Debt was $7,840 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2014 )/Interest Expense (A: Dec. 2014 )
=-1*5097/-396
=12.87

Halliburton Co's Interest Coverage for the quarter that ended in Sep. 2015 is calculated as

Here, for the three months ended in Sep. 2015, Halliburton Co's Interest Expense was $-102 Mil. Its Operating Income was $43 Mil. And its Long-Term Debt was $7,243 Mil.

Interest Coverage=-1*Operating Income (Q: Sep. 2015 )/Interest Expense (Q: Sep. 2015 )
=-1*43/-102
=0.42

* 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.

Halliburton Co Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
interest_coverage 19.6722.7124.016.8810.1318.0113.649.2612.87At Loss

Halliburton Co Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
interest_coverage 12.04At Loss10.1012.7016.51At LossAt Loss2.400.42At Loss
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