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JC Penney Co Inc (NYSE:JCP)
Interest Coverage
0.26 (As of Oct. 2016)

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. JC Penney Co Inc's Operating Income for the six months ended in Oct. 2016 was $23 Mil. JC Penney Co Inc's Interest Expense for the six months ended in Oct. 2016 was $-87 Mil. JC Penney Co Inc's interest coverage for the quarter that ended in Oct. 2016 was 0.26. The higher the ratio, the stronger the company’s financial strength is.

Warning Sign:

Ben Graham prefers companies interest coverage is at least 5. JC Penney Co Incs earnings cannot cover its interest expense. If the situation continues, the company may have to issue more debt.

JCP' s Interest Coverage Range Over the Past 10 Years
Min: 0.27   Max: 12.34
Current: 0.27

0.27
12.34
JCP's Interest Coverage is ranked lower than
98% of the 779 Companies
in the Global Department Stores industry.

( Industry Median: 26.18 vs. JCP: 0.27 )

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.


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.


Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

JC Penney Co Inc's Interest Coverage for the fiscal year that ended in Jan. 2016 is calculated as

Here, for the fiscal year that ended in Jan. 2016, JC Penney Co Inc's Interest Expense was $-405 Mil. Its Operating Income was $-89 Mil. And its Long-Term Debt was $4,678 Mil.

JC Penney Co Inc did not have earnings to cover the interest expense.

JC Penney Co Inc's Interest Coverage for the quarter that ended in Oct. 2016 is calculated as

Here, for the six months ended in Oct. 2016, JC Penney Co Inc's Interest Expense was $-87 Mil. Its Operating Income was $23 Mil. And its Long-Term Debt was $4,518 Mil.

Interest Coverage=-1*Operating Income (Q: Oct. 2016 )/Interest Expense (Q: Oct. 2016 )
=-1*23/-87
=0.26

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's 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 local exchange's currency.

JC Penney Co Inc Annual Data

Jan07Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16
interest_coverage 7.1212.345.042.553.60At LossAt LossAt LossAt LossAt Loss

JC Penney Co Inc Semi-Annual Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
interest_coverage At LossAt Loss1.17At LossAt LossAt LossAt Loss0.230.820.26
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