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Education Management Corp  (OTCPK:EDMC) Interest Coverage: At Loss (As of Jun. 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. Education Management Corp's Operating Income for the three months ended in Jun. 2014 was $-62 Mil. Education Management Corp's Interest Expense for the three months ended in Jun. 2014 was $-33 Mil. did not have earnings to cover the interest expense. The higher the ratio, the stronger the company's financial strength is.


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


Historical Data

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

* Premium members only.

Education Management Corp Annual Data

Jun05 Jun06 Jun07 Jun08 Jun09 Jun10 Jun11 Jun12 Jun13 Jun14
Interest Coverage Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 3.45 4.15 0.00 0.00 0.00

Education Management Corp Quarterly Data

Sep09 Dec09 Mar10 Jun10 Sep10 Dec10 Mar11 Jun11 Sep11 Dec11 Mar12 Jun12 Sep12 Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14
Interest Coverage Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 0.70 0.37 0.92 0.00 0.00

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.


Calculation

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 & Capital Lease Obligation 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.

Education Management Corp's Interest Coverage for the fiscal year that ended in Jun. 2014 is calculated as

Here, for the fiscal year that ended in Jun. 2014, Education Management Corp's Interest Expense was $-128 Mil. Its Operating Income was $-489 Mil. And its Long-Term Debt & Capital Lease Obligation was $1,272 Mil.

Education Management Corp did not have earnings to cover the interest expense.

Education Management Corp's Interest Coverage for the quarter that ended in Jun. 2014 is calculated as

Here, for the three months ended in Jun. 2014, Education Management Corp's Interest Expense was $-33 Mil. Its Operating Income was $-62 Mil. And its Long-Term Debt & Capital Lease Obligation was $1,272 Mil.

Education Management Corp 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 .


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