Interest Coverage From Continuing Operations (Historical)
Returns the interest coverage ratio, which measures how many times a company can pay its interest expense from operating earnings. This is a key indicator of financial health and debt serviceability.
Understanding the Metric
Interest coverage is calculated as:
Interest Coverage = EBIT / Interest ExpenseInterpretation:
- > 5.0: Strong - easily covers interest payments
- 2.5 - 5.0: Adequate - comfortable coverage
- 1.5 - 2.5: Weak - minimal cushion
- < 1.5: Distressed - may struggle to pay interest
Parameters
| Parameter | Description |
|---|---|
| Symbol | Stock ticker (e.g., AAPL, MSFT) |
| Year | Fiscal year or period code (lq, ly, lq-1, ly-1, lt, lt-1) |
| Quarter | Optional: 1, 2, 3, or 4 (default: 1) |
| TTM | Optional: "TTM" for trailing twelve months |
Risk Thresholds
| Ratio | Risk Level |
|---|---|
| > 10x | Very Low Risk |
| 5-10x | Low Risk |
| 2.5-5x | Moderate Risk |
| 1-2.5x | High Risk |
| < 1x | Distressed |
Examples
=hf_Interest_coverage_from_continuing_operations("AAPL", 2023, 4)=hf_Interest_coverage_from_continuing_operations("T", "ly")=hf_Interest_coverage_from_continuing_operations("MSFT", 2023, , "TTM")=hf_Interest_coverage_from_continuing_operations(A1, B1, C1)=hf_Interest_coverage_from_continuing_operations("VZ", "lq")When to Use
- Assessing debt serviceability
- Credit analysis and risk evaluation
- Comparing financial leverage across companies
- Evaluating bond/debt investment risk
- Monitoring covenant compliance
When NOT to Use
| Scenario | Use Instead |
|---|---|
| Need interest expense | hf_Interest_Expense() |
| Need debt-to-equity | Check leverage ratio functions |
| Company has no debt | Ratio will be infinite/N/A |
| Need cash-based coverage | Calculate from operating cash flow |
Common Issues & FAQ
Q: What if the ratio is negative? A: A negative ratio occurs when EBIT is negative (operating loss). This is a serious concern as the company can't cover interest from operations.
Q: What's a good interest coverage ratio? A: Generally, > 3x is considered safe for investment-grade credit. Utilities and REITs may operate with lower ratios (2-3x) due to stable cash flows.
Q: Why does this differ from cash interest coverage? A: This uses EBIT (accrual accounting). Cash interest coverage uses operating cash flow, which may be higher or lower depending on non-cash charges and working capital changes.
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