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Phillips 66  (NYSE:PSX) Interest Coverage: 9.07 (As of Jun. 2018)

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. Phillips 66's Operating Income for the three months ended in Jun. 2018 was $1,225 Mil. Phillips 66's Interest Expense for the three months ended in Jun. 2018 was $-135 Mil. Phillips 66's interest coverage for the quarter that ended in Jun. 2018 was 9.07. The higher the ratio, the stronger the company's financial strength is.

NYSE:PSX' s Interest Coverage Range Over the Past 10 Years
Min: 3.25   Max: 1078
Current: 4.98

3.25
1078

NYSE:PSX's Interest Coverage is ranked lower than
55% of the 161 Companies
in the Global industry.

( Industry Median: 11.72 vs. NYSE:PSX: 4.98 )

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.

Phillips 66 Annual Data

Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17
Interest Coverage Premium Member Only Premium Member Only Premium Member Only Premium Member Only 9.69 12.85 14.67 3.25 4.20

Phillips 66 Quarterly Data

Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17 Dec17 Mar18 Jun18
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 4.67 7.60 0.00 3.16 9.07

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.


Phillips 66 Distribution

* The bar in red indicates where Phillips 66's Interest Coverage falls into.



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.

Phillips 66's Interest Coverage for the fiscal year that ended in Dec. 2017 is calculated as

Here, for the fiscal year that ended in Dec. 2017, Phillips 66's Interest Expense was $-438 Mil. Its Operating Income was $1,838 Mil. And its Long-Term Debt & Capital Lease Obligation was $10,069 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2017 )/Interest Expense (A: Dec. 2017 )
=-1*1838/-438
=4.20

Phillips 66's Interest Coverage for the quarter that ended in Jun. 2018 is calculated as

Here, for the three months ended in Jun. 2018, Phillips 66's Interest Expense was $-135 Mil. Its Operating Income was $1,225 Mil. And its Long-Term Debt & Capital Lease Obligation was $11,023 Mil.

Interest Coverage=-1*Operating Income (Q: Jun. 2018 )/Interest Expense (Q: Jun. 2018 )
=-1*1225/-135
=9.07

* 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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