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Rite Aid Corp (NYSE:RAD)
Interest Coverage
2.37 (As of Nov. 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. Rite Aid Corp's Operating Income for the three months ended in Nov. 2014 was $231 Mil. Rite Aid Corp's Interest Expense for the three months ended in Nov. 2014 was $-97 Mil. Rite Aid Corp's interest coverage for the quarter that ended in Nov. 2014 was 2.37. The higher the ratio, the stronger the company’s financial strength is.

RAD' s 10-Year Interest Coverage Range
Min: 0.02   Max: 6.47
Current: 1.51

0.02
6.47

During the past 13 years, the highest interest coverage of Rite Aid Corp was 6.47. The lowest was 0.02. And the median was 1.17.

RAD's Interest Coverageis ranked lower than
52% of the 427 Companies
in the Global Pharmaceutical Retailers industry.

( Industry Median: 13.31 vs. RAD: 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

Rite Aid 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

Rite Aid Corp had no debt.

Rite Aid Corp's Interest Coverage for the fiscal year that ended in Feb. 2014 is calculated as

Here, for the fiscal year that ended in Feb. 2014, Rite Aid Corp's Interest Expense was $-425 Mil. Its Operating Income was $643 Mil. And its Long-Term Debt was $5,708 Mil.

Interest Coverage=-1*Operating Income (A: Feb. 2014 )/Interest Expense (A: Feb. 2014 )
=-1*642.841/-424.591
=1.51

Rite Aid Corp's Interest Coverage for the quarter that ended in Nov. 2014 is calculated as

Here, for the three months ended in Nov. 2014, Rite Aid Corp's Interest Expense was $-97 Mil. Its Operating Income was $231 Mil. And its Long-Term Debt was $5,739 Mil.

Interest Coverage=-1*Operating Income (Q: Nov. 2014 )/Interest Expense (Q: Nov. 2014 )
=-1*230.876/-97.4
=2.37

* 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.

Rite Aid Corp Annual Data

Feb05Feb06Feb07Feb08Feb09Feb10Feb11Feb12Feb13Feb14
interest_coverage 1.531.171.090.45At Loss0.020.040.311.251.51

Rite Aid Corp Quarterly Data

Aug12Nov12Feb13May13Aug13Nov13Feb14May14Aug14Nov14
interest_coverage 0.711.442.581.871.891.621.481.532.452.37
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