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Time Warner Inc (NYSE:TWX)
Interest Coverage
2.81 (As of Sep. 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. Time Warner Inc's Operating Income for the three months ended in Sep. 2014 was $971 Mil. Time Warner Inc's Interest Expense for the three months ended in Sep. 2014 was $-346 Mil. Time Warner Inc's interest coverage for the quarter that ended in Sep. 2014 was 2.81. The higher the ratio, the stronger the company’s financial strength is.

TWX' s 10-Year Interest Coverage Range
Min: 0.5   Max: 35.33
Current: 5.15

0.5
35.33

During the past 13 years, the highest interest coverage of Time Warner Inc was 35.33. The lowest was 0.50. And the median was 3.71.

TWX's Interest Coverageis ranked higher than
63% of the 308 Companies
in the Global Media - Diversified industry.

( Industry Median: 9.02 vs. TWX: 5.15 )

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

Time Warner 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

Time Warner Inc had no debt.

Time Warner Inc's Interest Coverage for the fiscal year that ended in Dec. 2013 is calculated as

Here, for the fiscal year that ended in Dec. 2013, Time Warner Inc's Interest Expense was $-1,283 Mil. Its Operating Income was $6,605 Mil. And its Long-Term Debt was $20,099 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2013 )/Interest Expense (A: Dec. 2013 )
=-1*6605/-1283
=5.15

Time Warner Inc's Interest Coverage for the quarter that ended in Sep. 2014 is calculated as

Here, for the three months ended in Sep. 2014, Time Warner Inc's Interest Expense was $-346 Mil. Its Operating Income was $971 Mil. And its Long-Term Debt was $21,389 Mil.

Interest Coverage=-1*Operating Income (Q: Sep. 2014 )/Interest Expense (Q: Sep. 2014 )
=-1*971/-346
=2.81

* 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.

Time Warner Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
interest_coverage 3.592.423.713.57At Loss3.434.614.804.355.15

Time Warner Inc Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
interest_coverage 3.194.655.984.464.275.396.435.894.692.81
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