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Wal-Mart Stores Inc (NYSE:WMT)
Interest Coverage
10.46 (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. Wal-Mart Stores Inc's Operating Income for the three months ended in Apr. 2014 was $6,193 Mil. Wal-Mart Stores Inc's Interest Expense for the three months ended in Apr. 2014 was $-592 Mil. Wal-Mart Stores Inc's interest coverage for the quarter that ended in Apr. 2014 was 10.46. The higher the ratio, the stronger the company’s financial strength is.

WMT' s 10-Year Interest Coverage Range
Min: 4.63   Max: 15.09
Current: 11.51

4.63
15.09

During the past 13 years, the highest interest coverage of Wal-Mart Stores Inc was 15.09. The lowest was 4.63. And the median was 11.33.

WMT's Interest Coverageis ranked higher than
64% of the 343 Companies
in the Global Discount Stores industry.

( Industry Median: 13.64 vs. WMT: 11.51 )

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

Wal-Mart Stores 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

Wal-Mart Stores Inc had no debt.

Wal-Mart Stores 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, Wal-Mart Stores Inc's Interest Expense was $-2,335 Mil. Its Operating Income was $26,872 Mil. And its Long-Term Debt was $44,559 Mil.

Interest Coverage=-1*Operating Income (A: Jan. 2014 )/Interest Expense (A: Jan. 2014 )
=-1*26872/-2335
=11.51

Wal-Mart Stores Inc's Interest Coverage for the quarter that ended in Apr. 2014 is calculated as

Here, for the three months ended in Apr. 2014, Wal-Mart Stores Inc's Interest Expense was $-592 Mil. Its Operating Income was $6,193 Mil. And its Long-Term Debt was $48,441 Mil.

Interest Coverage=-1*Operating Income (Q: Apr. 2014 )/Interest Expense (Q: Apr. 2014 )
=-1*6193/-592
=10.46

* 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.

Wal-Mart Stores Inc Annual Data

Jan05Jan06Jan07Jan08Jan09Jan10Jan11Jan12Jan13Jan14
interest_coverage 14.6113.1811.3310.4410.4411.6211.5811.4412.3311.51

Wal-Mart Stores Inc Quarterly Data

Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14
interest_coverage 15.0011.1512.0710.3316.1311.2411.5310.6612.6510.46
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