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Sherwin-Williams Co (NYSE:SHW)
Interest Coverage
33.65 (As of Sep. 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. Sherwin-Williams Co's Operating Income for the three months ended in Sep. 2015 was $572 Mil. Sherwin-Williams Co's Interest Expense for the three months ended in Sep. 2015 was $-17 Mil. Sherwin-Williams Co's interest coverage for the quarter that ended in Sep. 2015 was 33.65. The higher the ratio, the stronger the company’s financial strength is.

SHW' s Interest Coverage Range Over the Past 10 Years
Min: 10.67   Max: 21.9
Current: 26.28

10.67
21.9

During the past 13 years, the highest interest coverage of Sherwin-Williams Co was 21.90. The lowest was 10.67. And the median was 16.11.

SHW's Interest Coverage is ranked higher than
50% of the 697 Companies
in the Global Specialty Chemicals industry.

( Industry Median: 26.35 vs. SHW: 26.28 )

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.

Sherwin-Williams Co's Interest Coverage for the fiscal year that ended in Dec. 2014 is calculated as

Here, for the fiscal year that ended in Dec. 2014, Sherwin-Williams Co's Interest Expense was $-64 Mil. Its Operating Income was $1,304 Mil. And its Long-Term Debt was $1,123 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2014 )/Interest Expense (A: Dec. 2014 )
=-1*1304.036/-64.205
=20.31

Sherwin-Williams Co's Interest Coverage for the quarter that ended in Sep. 2015 is calculated as

Here, for the three months ended in Sep. 2015, Sherwin-Williams Co's Interest Expense was $-17 Mil. Its Operating Income was $572 Mil. And its Long-Term Debt was $1,920 Mil.

Interest Coverage=-1*Operating Income (Q: Sep. 2015 )/Interest Expense (Q: Sep. 2015 )
=-1*571.81/-16.995
=33.65

* 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.

Sherwin-Williams Co Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
interest_coverage 13.4213.5211.8917.0010.6718.2521.9018.2820.3126.14

Sherwin-Williams Co Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
interest_coverage 26.349.7211.0926.9029.6213.4516.4641.1933.6516.25
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