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Western Digital Corp (NAS:WDC)
Interest Coverage
24.77 (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. Western Digital Corp's Operating Income for the three months ended in Sep. 2015 was $322 Mil. Western Digital Corp's Interest Expense for the three months ended in Sep. 2015 was $-13 Mil. Western Digital Corp's interest coverage for the quarter that ended in Sep. 2015 was 24.77. The higher the ratio, the stronger the company’s financial strength is.

WDC' s Interest Coverage Range Over the Past 10 Years
Min: 19.22   Max: 169.44
Current: 26.86

19.22
169.44

During the past 13 years, the highest interest coverage of Western Digital Corp was 169.44. The lowest was 19.22. And the median was 50.50.

WDC's Interest Coverage is ranked lower than
65% of the 1344 Companies
in the Global Data Storage industry.

( Industry Median: 142.21 vs. WDC: 26.86 )

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.

Western Digital Corp's Interest Coverage for the fiscal year that ended in Jun. 2015 is calculated as

Here, for the fiscal year that ended in Jun. 2015, Western Digital Corp's Interest Expense was $-49 Mil. Its Operating Income was $1,611 Mil. And its Long-Term Debt was $2,156 Mil.

Interest Coverage=-1*Operating Income (A: Jun. 2015 )/Interest Expense (A: Jun. 2015 )
=-1*1611/-49
=32.88

Western Digital Corp's Interest Coverage for the quarter that ended in Sep. 2015 is calculated as

Here, for the three months ended in Sep. 2015, Western Digital Corp's Interest Expense was $-13 Mil. Its Operating Income was $322 Mil. And its Long-Term Debt was $2,109 Mil.

Interest Coverage=-1*Operating Income (Q: Sep. 2015 )/Interest Expense (Q: Sep. 2015 )
=-1*322/-13
=24.77

* 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.

Western Digital Corp Annual Data

Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15
interest_coverage 91.50103.7519.3519.22169.4478.1068.1223.0231.9832.88

Western Digital Corp Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
interest_coverage 41.6934.1424.65At Loss36.0838.8335.08At Loss24.77At Loss
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