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Shire PLC (NAS:SHPG)
Interest Coverage
12.17 (As of Mar. 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. Shire PLC's Operating Income for the three months ended in Mar. 2016 was $544 Mil. Shire PLC's Interest Expense for the three months ended in Mar. 2016 was $-45 Mil. Shire PLC's interest coverage for the quarter that ended in Mar. 2016 was 12.17. The higher the ratio, the stronger the company’s financial strength is.

SHPG' s Interest Coverage Range Over the Past 10 Years
Min: 2.96   Max: 55.13
Current: 19.41

2.96
55.13
SHPG's Interest Coverage is ranked lower than
76% of the 369 Companies
in the Global Biotechnology industry.

( Industry Median: 10000.00 vs. SHPG: 19.41 )

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.

Shire PLC'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, Shire PLC's Interest Expense was $-42 Mil. Its Operating Income was $1,420 Mil. And its Long-Term Debt was $70 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2015 )/Interest Expense (A: Dec. 2015 )
=-1*1419.5/-41.6
=34.12

Shire PLC's Interest Coverage for the quarter that ended in Mar. 2016 is calculated as

Here, for the three months ended in Mar. 2016, Shire PLC's Interest Expense was $-45 Mil. Its Operating Income was $544 Mil. And its Long-Term Debt was $4,654 Mil.

Interest Coverage=-1*Operating Income (Q: Mar. 2016 )/Interest Expense (Q: Mar. 2016 )
=-1*543.9/-44.7
=12.17

* 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.

Shire PLC Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
interest_coverage 10.73At Loss2.9615.5822.6228.3724.8545.5055.1334.12

Shire PLC Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
interest_coverage 56.4439.3530.4484.1294.3549.4411.7342.6035.6512.17
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