Switch to:
GuruFocus has detected 7 Warning Signs with Aetna Inc $AET.
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.
Aetna Inc (NYSE:AET)
Interest Coverage
At Loss (As of Mar. 2017)

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. Aetna Inc's Operating Income for the three months ended in Mar. 2017 was $-149 Mil. Aetna Inc's Interest Expense for the three months ended in Mar. 2017 was $-173 Mil. Aetna Inc did not have earnings to cover the interest expense. The higher the ratio, the stronger the company’s financial strength is.

AET' s Interest Coverage Range Over the Past 10 Years
Min: 4.61   Max: 15.48
Current: 4.61

4.61
15.48
AET's Interest Coverage is ranked lower than
87% of the 23 Companies
in the Global Health Care Plans industry.

( Industry Median: 12.62 vs. AET: 4.61 )

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.


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.


Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

Aetna Inc's Interest Coverage for the fiscal year that ended in Dec. 2016 is calculated as

Here, for the fiscal year that ended in Dec. 2016, Aetna Inc's Interest Expense was $-604 Mil. Its Operating Income was $4,714 Mil. And its Long-Term Debt was $19,027 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2016 )/Interest Expense (A: Dec. 2016 )
=-1*4714/-604
=7.80

Aetna Inc's Interest Coverage for the quarter that ended in Mar. 2017 is calculated as

Here, for the three months ended in Mar. 2017, Aetna Inc's Interest Expense was $-173 Mil. Its Operating Income was $-149 Mil. And its Long-Term Debt was $8,174 Mil.

Aetna Inc did not have earnings to cover the interest expense.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's 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 local exchange's currency.

Aetna Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
interest_coverage 15.489.207.8111.7613.9614.8210.2012.7513.177.80

Aetna Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
interest_coverage 7.6718.8317.6512.156.8114.2511.417.002.77At Loss
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat

{{numOfNotice}}
FEEDBACK