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United Parcel Service Inc (UPS) (NYSE:UPS)
Interest Coverage
16.81 (As of Mar. 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. United Parcel Service Inc (UPS)'s Operating Income for the three months ended in Mar. 2014 was $1,513 Mil. United Parcel Service Inc (UPS)'s Interest Expense for the three months ended in Mar. 2014 was $-90 Mil. United Parcel Service Inc (UPS)'s interest coverage for the quarter that ended in Mar. 2014 was 16.81. The higher the ratio, the stronger the company’s financial strength is.

UPS' s 10-Year Interest Coverage Range
Min: 2.35   Max: 36.74
Current: 18.51

2.35
36.74

During the past 13 years, the highest interest coverage of United Parcel Service Inc (UPS) was 36.74. The lowest was 2.35. And the median was 17.99.

UPS's Interest Coverageis ranked higher than
82% of the 669 Companies
in the Global Integrated Shipping & Logistics industry.

( Industry Median: 5.40 vs. UPS: 18.51 )

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

United Parcel Service Inc (UPS) 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

United Parcel Service Inc (UPS) had no debt.

United Parcel Service Inc (UPS)'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, United Parcel Service Inc (UPS)'s Interest Expense was $-380 Mil. Its Operating Income was $7,034 Mil. And its Long-Term Debt was $10,824 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2013 )/Interest Expense (A: Dec. 2013 )
=-1*7034/-380
=18.51

United Parcel Service Inc (UPS)'s Interest Coverage for the quarter that ended in Mar. 2014 is calculated as

Here, for the three months ended in Mar. 2014, United Parcel Service Inc (UPS)'s Interest Expense was $-90 Mil. Its Operating Income was $1,513 Mil. And its Long-Term Debt was $9,860 Mil.

Interest Coverage=-1*Operating Income (Q: Mar. 2014 )/Interest Expense (Q: Mar. 2014 )
=-1*1513/-90
=16.81

* 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.

United Parcel Service Inc (UPS) Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
interest_coverage 33.4835.7231.452.3512.188.5415.9417.473.4218.51

United Parcel Service Inc (UPS) Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
interest_coverage 16.6919.467.82At Loss19.6117.7819.6120.3016.818.39
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