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McCormick & Company Inc (NYSE:MKC)
Interest Coverage
9.74 (As of May. 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. McCormick & Company Inc's Operating Income for the three months ended in May. 2014 was $122 Mil. McCormick & Company Inc's Interest Expense for the three months ended in May. 2014 was $-13 Mil. McCormick & Company Inc's interest coverage for the quarter that ended in May. 2014 was 9.74. The higher the ratio, the stronger the company’s financial strength is.

MKC' s 10-Year Interest Coverage Range
Min: 3.64   Max: 10.59
Current: 10.33

3.64
10.59

During the past 13 years, the highest interest coverage of McCormick & Company Inc was 10.59. The lowest was 3.64. And the median was 6.33.

MKC's Interest Coverageis ranked higher than
61% of the 965 Companies
in the Global Packaged Foods industry.

( Industry Median: 15.59 vs. MKC: 10.33 )

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

McCormick & Company 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

McCormick & Company Inc had no debt.

McCormick & Company Inc's Interest Coverage for the fiscal year that ended in Nov. 2013 is calculated as

Here, for the fiscal year that ended in Nov. 2013, McCormick & Company Inc's Interest Expense was $-53 Mil. Its Operating Income was $551 Mil. And its Long-Term Debt was $1,019 Mil.

Interest Coverage=-1*Operating Income (A: Nov. 2013 )/Interest Expense (A: Nov. 2013 )
=-1*550.5/-53.3
=10.33

McCormick & Company Inc's Interest Coverage for the quarter that ended in May. 2014 is calculated as

Here, for the three months ended in May. 2014, McCormick & Company Inc's Interest Expense was $-13 Mil. Its Operating Income was $122 Mil. And its Long-Term Debt was $1,017 Mil.

Interest Coverage=-1*Operating Income (Q: May. 2014 )/Interest Expense (Q: May. 2014 )
=-1*121.7/-12.5
=9.74

* 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.

McCormick & Company Inc Annual Data

Nov04Nov05Nov06Nov07Nov08Nov09Nov10Nov11Nov12Nov13
interest_coverage 8.117.135.025.846.648.8410.3410.5510.5910.33

McCormick & Company Inc Quarterly Data

Feb12May12Aug12Nov12Feb13May13Aug13Nov13Feb14May14
interest_coverage 8.338.7310.9214.418.068.5910.6014.6310.059.74
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