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Pep Boys - Manny Moe & Jack (NYSE:PBY)
Interest Coverage
1.09 (As of Jul. 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. Pep Boys - Manny Moe & Jack's Operating Income for the three months ended in Jul. 2014 was $3 Mil. Pep Boys - Manny Moe & Jack's Interest Expense for the three months ended in Jul. 2014 was $-3 Mil. Pep Boys - Manny Moe & Jack's interest coverage for the quarter that ended in Jul. 2014 was 1.09. The higher the ratio, the stronger the company’s financial strength is.

PBY' s 10-Year Interest Coverage Range
Min: 0.34   Max: 6.17
Current: 1.51

0.34
6.17

During the past 13 years, the highest interest coverage of Pep Boys - Manny Moe & Jack was 6.17. The lowest was 0.34. And the median was 2.26.

PBY's Interest Coverageis ranked lower than
58% of the 906 Companies
in the Global Auto Parts industry.

( Industry Median: 17.75 vs. PBY: 1.51 )

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

Pep Boys - Manny Moe & Jack 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

Pep Boys - Manny Moe & Jack had no debt.

Pep Boys - Manny Moe & Jack's Interest Coverage for the fiscal year that ended in Jan. 2014 is calculated as

Here, for the fiscal year that ended in Jan. 2014, Pep Boys - Manny Moe & Jack's Interest Expense was $-15 Mil. Its Operating Income was $22 Mil. And its Long-Term Debt was $200 Mil.

Interest Coverage=-1*Operating Income (A: Jan. 2014 )/Interest Expense (A: Jan. 2014 )
=-1*22.298/-14.797
=1.51

Pep Boys - Manny Moe & Jack's Interest Coverage for the quarter that ended in Jul. 2014 is calculated as

Here, for the three months ended in Jul. 2014, Pep Boys - Manny Moe & Jack's Interest Expense was $-3 Mil. Its Operating Income was $3 Mil. And its Long-Term Debt was $220 Mil.

Interest Coverage=-1*Operating Income (Q: Jul. 2014 )/Interest Expense (Q: Jul. 2014 )
=-1*3.273/-3.002
=1.09

* 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.

Pep Boys - Manny Moe & Jack Annual Data

Jan05Jan06Jan07Jan08Jan09Jan10Jan11Jan12Jan13Jan14
interest_coverage 2.09At Loss0.73At LossAt Loss2.633.092.490.341.51

Pep Boys - Manny Moe & Jack Quarterly Data

Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14
interest_coverage 1.222.540.22At Loss0.964.982.10At Loss1.601.09
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