Archer-Daniels-Midland Company (ADM)
Interest coverage
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 4,958,000 | 5,604,000 | 3,552,000 | 2,212,000 | 1,990,000 |
| Interest expense | US$ in thousands | 647,000 | 396,000 | 265,000 | 339,000 | 402,000 |
| Interest coverage | 7.66 | 14.15 | 13.40 | 6.53 | 4.95 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $4,958,000K ÷ $647,000K
= 7.66
The interest coverage ratio measures a company's ability to pay interest on its outstanding debt with its operating income. A higher ratio indicates that the company is more capable of meeting its interest obligations.
For Archer-Daniels-Midland Company, the interest coverage ratio has shown a generally positive trend over the five-year period from 2019 to 2023. In 2019, the ratio was 4.95, indicating that the company's operating income was sufficient to cover its interest payments nearly 5 times over. This ratio increased to 6.53 in 2020, indicating an improvement in the company's ability to meet interest obligations.
The trend continued to show improvement in subsequent years, with the interest coverage ratio reaching 13.40 in 2021, demonstrating a significant increase in the company's ability to cover interest expenses. In 2022, the ratio improved even further to 14.15, reflecting a strong financial position with ample operating income to cover interest payments.
However, there was a slight decrease in the interest coverage ratio in 2023 to 7.66, compared to the previous year. While the ratio still indicates that the company's operating income is more than sufficient to cover its interest expenses, the decrease warrants further investigation to understand the underlying reasons for the change.
Overall, Archer-Daniels-Midland Company's interest coverage has shown a positive trend over the five-year period, indicating an improvement in the company's financial health and ability to meet its debt obligations.
Peer comparison
Dec 31, 2023