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Humana Inc (NYSE:HUM)
Interest Coverage
18.46 (As of Jun. 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. Humana Inc's Operating Income for the three months ended in Jun. 2014 was $646 Mil. Humana Inc's Interest Expense for the three months ended in Jun. 2014 was $-35 Mil. Humana Inc's interest coverage for the quarter that ended in Jun. 2014 was 18.46. The higher the ratio, the stronger the company’s financial strength is.

HUM' s 10-Year Interest Coverage Range
Min: 4.98   Max: 20.5
Current: 13.72

4.98
20.5

During the past 13 years, the highest interest coverage of Humana Inc was 20.50. The lowest was 4.98. And the median was 13.40.

HUM's Interest Coverageis ranked higher than
86% of the 29 Companies
in the Global Health Care Plans industry.

( Industry Median: 8.28 vs. HUM: 13.72 )

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

Humana 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

Humana Inc had no debt.

Humana 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, Humana Inc's Interest Expense was $-140 Mil. Its Operating Income was $1,921 Mil. And its Long-Term Debt was $2,600 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2013 )/Interest Expense (A: Dec. 2013 )
=-1*1921/-140
=13.72

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

Here, for the three months ended in Jun. 2014, Humana Inc's Interest Expense was $-35 Mil. Its Operating Income was $646 Mil. And its Long-Term Debt was $2,595 Mil.

Interest Coverage=-1*Operating Income (Q: Jun. 2014 )/Interest Expense (Q: Jun. 2014 )
=-1*646/-35
=18.46

* 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.

Humana Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
interest_coverage 18.9511.7313.0718.7212.3715.1316.6620.5018.2013.72

Humana Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
interest_coverage 15.0021.6925.9610.4420.8618.6916.74At Loss19.6018.46
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