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Honda Motor Co Ltd (NYSE:HMC)
Interest Coverage
37.49 (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. Honda Motor Co Ltd's Operating Income for the three months ended in Sep. 2014 was $1,531 Mil. Honda Motor Co Ltd's Interest Expense for the three months ended in Sep. 2014 was $-41 Mil. Honda Motor Co Ltd's interest coverage for the quarter that ended in Sep. 2014 was 37.49. The higher the ratio, the stronger the company’s financial strength is.

HMC' s 10-Year Interest Coverage Range
Min: 3.14   Max: 73.08
Current: 59.06

3.14
73.08

During the past 13 years, the highest interest coverage of Honda Motor Co Ltd was 73.08. The lowest was 3.14. And the median was 34.27.

HMC's Interest Coverageis ranked higher than
79% of the 907 Companies
in the Global Auto Manufacturers industry.

( Industry Median: 17.75 vs. HMC: 59.06 )

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

Honda Motor Co Ltd 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

Honda Motor Co Ltd had no debt.

Honda Motor Co Ltd's Interest Coverage for the fiscal year that ended in Mar. 2014 is calculated as

Here, for the fiscal year that ended in Mar. 2014, Honda Motor Co Ltd's Interest Expense was $-124 Mil. Its Operating Income was $7,331 Mil. And its Long-Term Debt was $31,601 Mil.

Interest Coverage=-1*Operating Income (A: Mar. 2014 )/Interest Expense (A: Mar. 2014 )
=-1*7331.25854993/-124.125464139
=59.06

Honda Motor Co Ltd's Interest Coverage for the quarter that ended in Sep. 2014 is calculated as

Here, for the three months ended in Sep. 2014, Honda Motor Co Ltd's Interest Expense was $-41 Mil. Its Operating Income was $1,531 Mil. And its Long-Term Debt was $31,632 Mil.

Interest Coverage=-1*Operating Income (Q: Sep. 2014 )/Interest Expense (Q: Sep. 2014 )
=-1*1530.7510214/-40.8282189457
=37.49

* 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.

Honda Motor Co Ltd Annual Data

Mar05Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13Mar14
interest_coverage 54.0073.0865.7457.428.4128.9867.2422.2944.8159.06

Honda Motor Co Ltd Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
interest_coverage 58.3632.3846.9242.3162.1960.4159.3954.3444.8837.49
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