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Masco Corp (NYSE:MAS)
Interest Coverage
2.71 (As of Mar. 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. Masco Corp's Operating Income for the three months ended in Mar. 2014 was $152 Mil. Masco Corp's Interest Expense for the three months ended in Mar. 2014 was $-56 Mil. Masco Corp's interest coverage for the quarter that ended in Mar. 2014 was 2.71. The higher the ratio, the stronger the company’s financial strength is.

MAS' s 10-Year Interest Coverage Range
Min: 0.24   Max: 7.57
Current: 2.86

0.24
7.57

During the past 13 years, the highest interest coverage of Masco Corp was 7.57. The lowest was 0.24. And the median was 5.45.

MAS's Interest Coverageis ranked lower than
53% of the 327 Companies
in the Global Building Materials industry.

( Industry Median: 13.24 vs. MAS: 2.86 )

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

Masco Corp 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

Masco Corp had no debt.

Masco Corp'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, Masco Corp's Interest Expense was $-235 Mil. Its Operating Income was $673 Mil. And its Long-Term Debt was $3,421 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2013 )/Interest Expense (A: Dec. 2013 )
=-1*673/-235
=2.86

Masco Corp's Interest Coverage for the quarter that ended in Mar. 2014 is calculated as

Here, for the three months ended in Mar. 2014, Masco Corp's Interest Expense was $-56 Mil. Its Operating Income was $152 Mil. And its Long-Term Debt was $3,421 Mil.

Interest Coverage=-1*Operating Income (Q: Mar. 2014 )/Interest Expense (Q: Mar. 2014 )
=-1*152/-56
=2.71

* 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.

Masco Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
interest_coverage 7.306.444.654.090.390.24At LossAt Loss1.192.86

Masco Corp Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
interest_coverage At Loss1.700.791.740.522.203.133.662.472.71
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