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Li & Fung Ltd (OTCPK:LFUGF)
Interest Coverage
8.88 (As of Dec. 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. Li & Fung Ltd's Operating Income for the six months ended in Dec. 2014 was $429 Mil. Li & Fung Ltd's Interest Expense for the six months ended in Dec. 2014 was $-48 Mil. Li & Fung Ltd's interest coverage for the quarter that ended in Dec. 2014 was 8.88. The higher the ratio, the stronger the company’s financial strength is.

LFUGF' s 10-Year Interest Coverage Range
Min: 5.85   Max: 135.68
Current: 6.88

5.85
135.68

During the past 13 years, the highest interest coverage of Li & Fung Ltd was 135.68. The lowest was 5.85. And the median was 10.72.

LFUGF's Interest Coverageis ranked lower than
77% of the 491 Companies
in the Global Business Services industry.

( Industry Median: 42.21 vs. LFUGF: 6.88 )

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.

Li & Fung Ltd'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, Li & Fung Ltd's Interest Expense was $-105 Mil. Its Operating Income was $724 Mil. And its Long-Term Debt was $1,254 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2014 )/Interest Expense (A: Dec. 2014 )
=-1*723.625/-105.179
=6.88

Li & Fung Ltd's Interest Coverage for the quarter that ended in Dec. 2014 is calculated as

Here, for the six months ended in Dec. 2014, Li & Fung Ltd's Interest Expense was $-48 Mil. Its Operating Income was $429 Mil. And its Long-Term Debt was $1,254 Mil.

Interest Coverage=-1*Operating Income (Q: Dec. 2014 )/Interest Expense (Q: Dec. 2014 )
=-1*428.971/-48.303
=8.88

* 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.

Li & Fung Ltd Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
interest_coverage 88.1716.297.206.3410.726.906.845.857.556.88

Li & Fung Ltd Semi-Annual Data

Jun10Dec10Jun11Dec11Jun12Dec12Jun13Dec13Jun14Dec14
interest_coverage 9.415.535.178.385.815.894.1911.135.188.88
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