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Tesco PLC (OTCPK:TSCDY)
Interest Coverage
1.15 (As of Aug. 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. Tesco PLC's Operating Income for the six months ended in Aug. 2014 was $579 Mil. Tesco PLC's Interest Expense for the six months ended in Aug. 2014 was $-503 Mil. Tesco PLC's interest coverage for the quarter that ended in Aug. 2014 was 1.15. The higher the ratio, the stronger the company’s financial strength is.

TSCDY' s 10-Year Interest Coverage Range
Min: 5.55   Max: 13.34
Current: 5.89

5.55
13.34

During the past 13 years, the highest interest coverage of Tesco PLC was 13.34. The lowest was 5.55. And the median was 7.47.

TSCDY's Interest Coverageis ranked higher than
60% of the 427 Companies
in the Global Grocery Stores industry.

( Industry Median: 13.31 vs. TSCDY: 5.89 )

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

Tesco PLC 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

Tesco PLC had no debt.

Tesco PLC'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, Tesco PLC's Interest Expense was $-740 Mil. Its Operating Income was $4,356 Mil. And its Long-Term Debt was $15,402 Mil.

Interest Coverage=-1*Operating Income (A: Feb. 2014 )/Interest Expense (A: Feb. 2014 )
=-1*4355.9602649/-740.066225166
=5.89

Tesco PLC's Interest Coverage for the quarter that ended in Aug. 2014 is calculated as

Here, for the six months ended in Aug. 2014, Tesco PLC's Interest Expense was $-503 Mil. Its Operating Income was $579 Mil. And its Long-Term Debt was $18,207 Mil.

Interest Coverage=-1*Operating Income (Q: Aug. 2014 )/Interest Expense (Q: Aug. 2014 )
=-1*579.298831386/-502.504173623
=1.15

* 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.

Tesco PLC Annual Data

Feb05Feb06Feb07Feb08Feb09Feb10Feb11Feb12Feb13Feb14
interest_coverage 8.319.8312.4911.167.926.518.4210.185.555.89

Tesco PLC Semi-Annual Data

Feb10Aug10Feb11Aug11Feb12Aug12Feb13Aug13Feb14Aug14
interest_coverage 7.796.9810.2910.1910.166.892.735.666.261.15
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