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Pep Boys - Manny Moe & Jack  (NYSE:PBY) Interest Coverage: 1.38 (As of Oct. 2015)

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. Pep Boys - Manny Moe & Jack's Operating Income for the three months ended in Oct. 2015 was \$4 Mil. Pep Boys - Manny Moe & Jack's Interest Expense for the three months ended in Oct. 2015 was \$-3 Mil. Pep Boys - Manny Moe & Jack's interest coverage for the quarter that ended in Oct. 2015 was 1.38. 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.

Pep Boys - Manny Moe & Jack Annual Data

 Jan06 Jan07 Jan08 Jan09 Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Interest Coverage 3.09 2.49 0.34 1.51 0.00

Pep Boys - Manny Moe & Jack Quarterly Data

 Jan11 Apr11 Jul11 Oct11 Jan12 Apr12 Jul12 Oct12 Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Interest Coverage 0.16 0.00 6.95 3.24 1.38

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

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

Pep Boys - Manny Moe & Jack's Interest Coverage for the fiscal year that ended in Jan. 2015 is calculated as

Here, for the fiscal year that ended in Jan. 2015, Pep Boys - Manny Moe & Jack's Interest Expense was \$-14 Mil. Its Operating Income was \$-19 Mil. And its Long-Term Debt & Capital Lease Obligation was \$211 Mil.

 Pep Boys - Manny Moe & Jack did not have earnings to cover the interest expense.

Pep Boys - Manny Moe & Jack's Interest Coverage for the quarter that ended in Oct. 2015 is calculated as

Here, for the three months ended in Oct. 2015, Pep Boys - Manny Moe & Jack's Interest Expense was \$-3 Mil. Its Operating Income was \$4 Mil. And its Long-Term Debt & Capital Lease Obligation was \$193 Mil.

 Interest Coverage = -1 * Operating Income (Q: Oct. 2015 ) / Interest Expense (Q: Oct. 2015 ) = -1 * 4.425 / -3.217 = 1.38

* 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