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Zale Corp (NYSE:ZLC)
Interest Coverage
9.76 (As of Jan. 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. Zale Corp's Operating Income for the three months ended in Jan. 2014 was $60 Mil. Zale Corp's Interest Expense for the three months ended in Jan. 2014 was $-6 Mil. Zale Corp's interest coverage for the quarter that ended in Jan. 2014 was 9.76. The higher the ratio, the stronger the company’s financial strength is.

ZLC' s 10-Year Interest Coverage Range
Min: 0.43   Max: 23.43
Current: 1.51

0.43
23.43

During the past 13 years, the highest interest coverage of Zale Corp was 23.43. The lowest was 0.43. And the median was 4.75.

ZLC's Interest Coverageis ranked lower than
58% of the 734 Companies
in the Global Luxury Goods industry.

( Industry Median: 35.22 vs. ZLC: 1.51 )

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

Zale Corp 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

Zale Corp had no debt.

Zale Corp's Interest Coverage for the fiscal year that ended in Jul. 2013 is calculated as

Here, for the fiscal year that ended in Jul. 2013, Zale Corp's Interest Expense was $-23 Mil. Its Operating Income was $35 Mil. And its Long-Term Debt was $410 Mil.

Interest Coverage=-1*Operating Income (A: Jul. 2013 )/Interest Expense (A: Jul. 2013 )
=-1*35.118/-23.182
=1.51

Zale Corp's Interest Coverage for the quarter that ended in Jan. 2014 is calculated as

Here, for the three months ended in Jan. 2014, Zale Corp's Interest Expense was $-6 Mil. Its Operating Income was $60 Mil. And its Long-Term Debt was $445 Mil.

Interest Coverage=-1*Operating Income (Q: Jan. 2014 )/Interest Expense (Q: Jan. 2014 )
=-1*59.522/-6.096
=9.76

* 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.

Zale Corp Annual Data

Jul04Jul05Jul06Jul07Jul08Jul09Jul10Jul11Jul12Jul13
interest_coverage 23.4323.027.255.440.95At LossAt LossAt Loss0.431.51

Zale Corp Quarterly Data

Oct11Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14
interest_coverage At Loss4.140.63At LossAt Loss8.421.75At LossAt Loss9.76
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