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MasterCard Inc (NYSE:MA)
Interest Coverage
92.20 (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. MasterCard Inc's Operating Income for the three months ended in Jun. 2014 was $1,383 Mil. MasterCard Inc's Interest Expense for the three months ended in Jun. 2014 was $-15 Mil. MasterCard Inc's interest coverage for the quarter that ended in Jun. 2014 was 92.20. The higher the ratio, the stronger the company’s financial strength is.

Good Sign:

Ben Graham prefers companies interest coverage is at least 5. MasterCard Inc has enough cash to cover all of its debt. Its financial situation is stable.

MA' s 10-Year Interest Coverage Range
Min: 3.75   Max: 9999.99
Current: 321.64

3.75
9999.99

During the past 13 years, the highest interest coverage of MasterCard Inc was 9999.99. The lowest was 3.75. And the median was 21.44.

MA's Interest Coverageis ranked higher than
94% of the 109 Companies
in the Global Credit Services industry.

( Industry Median: 3.44 vs. MA: 321.64 )

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

MasterCard 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

MasterCard Inc had no debt.

MasterCard 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, MasterCard Inc's Interest Expense was $-14 Mil. Its Operating Income was $4,503 Mil. And its Long-Term Debt was $0 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2013 )/Interest Expense (A: Dec. 2013 )
=-1*4503/-14
=321.64

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

Here, for the three months ended in Jun. 2014, MasterCard Inc's Interest Expense was $-15 Mil. Its Operating Income was $1,383 Mil. And its Long-Term Debt was $1,494 Mil.

Interest Coverage=-1*Operating Income (Q: Jun. 2014 )/Interest Expense (Q: Jun. 2014 )
=-1*1383/-15
=92.20

* 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.

MasterCard Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
interest_coverage 4.975.603.7519.35At Loss19.6552.92108.52196.85321.64

MasterCard Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
interest_coverage 166.67324.67266.00128.43221.40245.60416.00131.43214.1792.20
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