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Level 3 Communications Inc (NYSE:LVLT)
Interest Coverage
2.68 (As of Mar. 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. Level 3 Communications Inc's Operating Income for the three months ended in Mar. 2016 was $362 Mil. Level 3 Communications Inc's Interest Expense for the three months ended in Mar. 2016 was $-135 Mil. Level 3 Communications Inc's interest coverage for the quarter that ended in Mar. 2016 was 2.68. The higher the ratio, the stronger the company’s financial strength is.

LVLT' s Interest Coverage Range Over the Past 10 Years
Min: 0.06   Max: 2.07
Current: 2.31

0.06
2.07
LVLT's Interest Coverage is ranked lower than
75% of the 353 Companies
in the Global Telecom Services industry.

( Industry Median: 6.21 vs. LVLT: 2.31 )

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.

Level 3 Communications Inc's Interest Coverage for the fiscal year that ended in Dec. 2015 is calculated as

Here, for the fiscal year that ended in Dec. 2015, Level 3 Communications Inc's Interest Expense was $-642 Mil. Its Operating Income was $1,331 Mil. And its Long-Term Debt was $10,994 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2015 )/Interest Expense (A: Dec. 2015 )
=-1*1331/-642
=2.07

Level 3 Communications Inc's Interest Coverage for the quarter that ended in Mar. 2016 is calculated as

Here, for the three months ended in Mar. 2016, Level 3 Communications Inc's Interest Expense was $-135 Mil. Its Operating Income was $362 Mil. And its Long-Term Debt was $10,870 Mil.

Interest Coverage=-1*Operating Income (Q: Mar. 2016 )/Interest Expense (Q: Mar. 2016 )
=-1*362/-135
=2.68

* 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.

Level 3 Communications Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
interest_coverage At LossAt Loss0.06At LossAt Loss0.070.781.031.552.07

Level 3 Communications Inc Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
interest_coverage 1.481.751.721.651.181.762.122.262.222.68
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