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Ryder System Inc (NYSE:R)
Interest Coverage
3.67 (As of Jun. 2016)

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. Ryder System Inc's Operating Income for the three months ended in Jun. 2016 was $137 Mil. Ryder System Inc's Interest Expense for the three months ended in Jun. 2016 was $-37 Mil. Ryder System Inc's interest coverage for the quarter that ended in Jun. 2016 was 3.67. The higher the ratio, the stronger the company’s financial strength is.

Warning Sign:

Ben Graham prefers companies interest coverage is at least 5. Ryder System Inc interest coverage is 3.48, which is low.

R' s Interest Coverage Range Over the Past 10 Years
Min: 1   Max: 4.02
Current: 3.48

1
4.02
R's Interest Coverage is ranked lower than
75% of the 233 Companies
in the Global Rental & Leasing Services industry.

( Industry Median: 18.27 vs. R: 3.48 )

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.


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.


Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

Ryder System Inc's Interest Coverage for the fiscal year that ended in Dec. 2015 is calculated as

Here, for the fiscal year that ended in Dec. 2015, Ryder System Inc's Interest Expense was $-150 Mil. Its Operating Income was $506 Mil. And its Long-Term Debt was $4,883 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2015 )/Interest Expense (A: Dec. 2015 )
=-1*505.909/-150.434
=3.36

Ryder System Inc's Interest Coverage for the quarter that ended in Jun. 2016 is calculated as

Here, for the three months ended in Jun. 2016, Ryder System Inc's Interest Expense was $-37 Mil. Its Operating Income was $137 Mil. And its Long-Term Debt was $4,587 Mil.

Interest Coverage=-1*Operating Income (Q: Jun. 2016 )/Interest Expense (Q: Jun. 2016 )
=-1*136.591/-37.268
=3.67

* 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.

Ryder System Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
interest_coverage 4.022.533.711.002.163.062.522.833.063.36

Ryder System Inc Quarterly Data

Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16
interest_coverage 2.163.263.593.202.483.623.803.672.783.67
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