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Microsoft Corp (NAS:MSFT)
Interest Coverage
36.30 (As of Sep. 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. Microsoft Corp's Operating Income for the three months ended in Sep. 2014 was $5,844 Mil. Microsoft Corp's Interest Expense for the three months ended in Sep. 2014 was $-161 Mil. Microsoft Corp's interest coverage for the quarter that ended in Sep. 2014 was 36.30. The higher the ratio, the stronger the company’s financial strength is.

MSFT' s 10-Year Interest Coverage Range
Min: 46.5   Max: 9999.99
Current: 46.5

46.5
9999.99

During the past 13 years, the highest interest coverage of Microsoft Corp was 9999.99. The lowest was 46.50. And the median was 10000.00.

MSFT's Interest Coverageis ranked higher than
57% of the 1364 Companies
in the Global Software - Infrastructure industry.

( Industry Median: 2350.48 vs. MSFT: 46.50 )

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

Microsoft 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

Microsoft Corp had no debt.

Microsoft Corp's Interest Coverage for the fiscal year that ended in Jun. 2014 is calculated as

Here, for the fiscal year that ended in Jun. 2014, Microsoft Corp's Interest Expense was $-597 Mil. Its Operating Income was $27,759 Mil. And its Long-Term Debt was $20,645 Mil.

Interest Coverage=-1*Operating Income (A: Jun. 2014 )/Interest Expense (A: Jun. 2014 )
=-1*27759/-597
=46.50

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

Here, for the three months ended in Sep. 2014, Microsoft Corp's Interest Expense was $-161 Mil. Its Operating Income was $5,844 Mil. And its Long-Term Debt was $18,472 Mil.

Interest Coverage=-1*Operating Income (Q: Sep. 2014 )/Interest Expense (Q: Sep. 2014 )
=-1*5844/-161
=36.30

* 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.

Microsoft Corp Annual Data

Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14
interest_coverage No DebtNo DebtNo Debt210.10535.87159.5992.0757.2762.3946.50

Microsoft Corp Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
interest_coverage 2.0055.8774.0169.8350.6153.6859.0339.8538.3636.30
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