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Procter & Gamble Co (NYSE:PG)
Interest Coverage
6.33 (As of Jun. 2015)

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. Procter & Gamble Co's Operating Income for the three months ended in Jun. 2015 was $930 Mil. Procter & Gamble Co's Interest Expense for the three months ended in Jun. 2015 was $-147 Mil. Procter & Gamble Co's interest coverage for the quarter that ended in Jun. 2015 was 6.33. The higher the ratio, the stronger the company’s financial strength is.

PG' s 10-Year Interest Coverage Range
Min: 5.96   Max: 21.71
Current: 18.83

5.96
21.71

During the past 13 years, the highest interest coverage of Procter & Gamble Co was 21.71. The lowest was 5.96. And the median was 11.94.

PG's Interest Coverageis ranked lower than
55% of the 817 Companies
in the Global Household & Personal Products industry.

( Industry Median: 26.04 vs. PG: 18.83 )

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

The company did not have earnings to cover the interest expense.

Else if Interest Expense is 0 and Long-Term Debt is 0, then

The company had no debt.

Procter & Gamble Co's Interest Coverage for the fiscal year that ended in Jun. 2015 is calculated as

Here, for the fiscal year that ended in Jun. 2015, Procter & Gamble Co's Interest Expense was $-626 Mil. Its Operating Income was $11,790 Mil. And its Long-Term Debt was $18,329 Mil.

Interest Coverage=-1*Operating Income (A: Jun. 2015 )/Interest Expense (A: Jun. 2015 )
=-1*11790/-626
=18.83

Procter & Gamble Co's Interest Coverage for the quarter that ended in Jun. 2015 is calculated as

Here, for the three months ended in Jun. 2015, Procter & Gamble Co's Interest Expense was $-147 Mil. Its Operating Income was $930 Mil. And its Long-Term Debt was $18,329 Mil.

Interest Coverage=-1*Operating Income (Q: Jun. 2015 )/Interest Expense (Q: Jun. 2015 )
=-1*930/-147
=6.33

* 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.

Procter & Gamble Co Annual Data

Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15
interest_coverage 11.8411.8511.3411.8716.9419.0317.2821.7121.5618.83

Procter & Gamble Co Quarterly Data

Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15
interest_coverage 20.8915.2324.9723.2518.3717.6617.4024.6721.046.33
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