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Lowe's Companies Inc (NYSE:LOW)
Interest Coverage
10.04 (As of Apr. 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. Lowe's Companies Inc's Operating Income for the three months ended in Apr. 2016 was $1,586 Mil. Lowe's Companies Inc's Interest Expense for the three months ended in Apr. 2016 was $-158 Mil. Lowe's Companies Inc's interest coverage for the quarter that ended in Apr. 2016 was 10.04. The higher the ratio, the stronger the company’s financial strength is.

LOW' s Interest Coverage Range Over the Past 10 Years
Min: 6.16   Max: 25.01
Current: 6.16

6.16
25.01
LOW's Interest Coverage is ranked lower than
73% of the 801 Companies
in the Global Home Improvement Stores industry.

( Industry Median: 27.43 vs. LOW: 6.16 )

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.

Lowe's Companies 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, Lowe's Companies Inc's Interest Expense was $-557 Mil. Its Operating Income was $4,971 Mil. And its Long-Term Debt was $11,545 Mil.

Interest Coverage=-1*Operating Income (A: Jan. 2016 )/Interest Expense (A: Jan. 2016 )
=-1*4971/-557
=8.92

Lowe's Companies Inc's Interest Coverage for the quarter that ended in Apr. 2016 is calculated as

Here, for the three months ended in Apr. 2016, Lowe's Companies Inc's Interest Expense was $-158 Mil. Its Operating Income was $1,586 Mil. And its Long-Term Debt was $14,322 Mil.

Interest Coverage=-1*Operating Income (Q: Apr. 2016 )/Interest Expense (Q: Apr. 2016 )
=-1*1586/-158
=10.04

* 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.

Lowe's Companies Inc Annual Data

Jan07Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16
interest_coverage 25.0119.6911.8310.2410.478.347.768.759.168.92

Lowe's Companies Inc Quarterly Data

Apr14Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16
interest_coverage 8.5314.32181.331.609.1914.61265.600.8010.0412.36
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