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Nielsen NV (NYSE:NLSN)
Interest Coverage
2.51 (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. Nielsen NV's Operating Income for the three months ended in Mar. 2014 was $193 Mil. Nielsen NV's Interest Expense for the three months ended in Mar. 2014 was $-77 Mil. Nielsen NV's interest coverage for the quarter that ended in Mar. 2014 was 2.51. The higher the ratio, the stronger the company’s financial strength is.

NLSN' s 10-Year Interest Coverage Range
Min: 0.18   Max: 2.79
Current: 2.79

0.18
2.79

During the past 6 years, the highest interest coverage of Nielsen NV was 2.79. The lowest was 0.18. And the median was 1.39.

NLSN's Interest Coverageis ranked lower than
60% of the 653 Companies
in the Global Business Services industry.

( Industry Median: 20.56 vs. NLSN: 2.79 )

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

Nielsen NV 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

Nielsen NV had no debt.

Nielsen NV'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, Nielsen NV's Interest Expense was $-309 Mil. Its Operating Income was $861 Mil. And its Long-Term Debt was $6,492 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2013 )/Interest Expense (A: Dec. 2013 )
=-1*861/-309
=2.79

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

Here, for the three months ended in Mar. 2014, Nielsen NV's Interest Expense was $-77 Mil. Its Operating Income was $193 Mil. And its Long-Term Debt was $6,461 Mil.

Interest Coverage=-1*Operating Income (Q: Mar. 2014 )/Interest Expense (Q: Mar. 2014 )
=-1*193/-77
=2.51

* 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.

Nielsen NV Annual Data

Dec08Dec09Dec10Dec11Dec12Dec13
interest_coverage At LossAt LossAt LossAt Loss0.600.181.111.662.262.79

Nielsen NV Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
interest_coverage 2.391.482.272.443.171.823.263.122.982.51
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