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Staples Inc (NAS:SPLS)
Interest Coverage
12.88 (As of Apr. 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. Staples Inc's Operating Income for the three months ended in Apr. 2014 was $159 Mil. Staples Inc's Interest Expense for the three months ended in Apr. 2014 was $-12 Mil. Staples Inc's interest coverage for the quarter that ended in Apr. 2014 was 12.88. The higher the ratio, the stronger the company’s financial strength is.

SPLS' s 10-Year Interest Coverage Range
Min: 3.14   Max: 40.39
Current: 9.87

3.14
40.39

During the past 13 years, the highest interest coverage of Staples Inc was 40.39. The lowest was 3.14. And the median was 13.97.

SPLS's Interest Coverageis ranked higher than
56% of the 736 Companies
in the Global Specialty Retail industry.

( Industry Median: 35.22 vs. SPLS: 9.87 )

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

Staples Inc 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

Staples Inc had no debt.

Staples Inc's Interest Coverage for the fiscal year that ended in Jan. 2014 is calculated as

Here, for the fiscal year that ended in Jan. 2014, Staples Inc's Interest Expense was $-119 Mil. Its Operating Income was $1,178 Mil. And its Long-Term Debt was $1,000 Mil.

Interest Coverage=-1*Operating Income (A: Jan. 2014 )/Interest Expense (A: Jan. 2014 )
=-1*1177.501/-119.329
=9.87

Staples Inc's Interest Coverage for the quarter that ended in Apr. 2014 is calculated as

Here, for the three months ended in Apr. 2014, Staples Inc's Interest Expense was $-12 Mil. Its Operating Income was $159 Mil. And its Long-Term Debt was $1,017 Mil.

Interest Coverage=-1*Operating Income (Q: Apr. 2014 )/Interest Expense (Q: Apr. 2014 )
=-1*158.78/-12.324
=12.88

* 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.

Staples Inc Annual Data

Jan05Jan06Jan07Jan08Jan09Jan10Jan11Jan12Jan13Jan14
interest_coverage 26.5021.7430.6040.399.165.837.389.423.149.87

Staples Inc Quarterly Data

Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14
interest_coverage 11.177.755.44At Loss8.199.206.2012.0412.2312.88
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