Advanced Micro Devices Inc (AMD)

Interest coverage

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	2,114,000	614,000	1,286,000	3,709,000	1,327,000
Interest expense	US$ in thousands	92,000	106,000	88,000	34,000	47,000
Interest coverage		22.98	5.79	14.61	109.09	28.23

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $2,114,000K ÷ $92,000K
= 22.98

Interest coverage ratio measures a company's ability to cover its interest expenses with its operating income. In the case of Advanced Micro Devices Inc, the interest coverage ratio has shown fluctuations over the years.

As of December 31, 2020, the interest coverage ratio stood at a healthy 28.23, indicating that the company generated more than enough operating income to cover its interest expenses. This suggests a strong financial position and ability to meet debt obligations comfortably.

By December 31, 2021, the interest coverage ratio significantly improved to 109.09, indicating a substantial increase in the company's ability to cover its interest payments. This sharp improvement suggests enhanced operational efficiency and better management of interest expenses.

However, the ratio declined by December 31, 2022, to 14.61. Although this figure still indicates that the company's operating income is sufficient to cover interest payments, it is lower than previous years, signaling a potential decrease in financial flexibility and could merit further investigation.

By December 31, 2023, the interest coverage ratio decreased further to 5.79, suggesting a significant decrease in the company's ability to cover interest expenses with its operating income. This could raise concerns about the company's financial health and its ability to service its debt obligations effectively.

The ratio then rebounded to 22.98 by December 31, 2024, showing some improvement in the company's ability to cover interest expenses. However, it is still below the levels seen in the earlier years, indicating that the company may still face challenges in managing its interest payments efficiently.

In conclusion, the interest coverage ratio of Advanced Micro Devices Inc has shown fluctuations over the years, with significant improvements followed by declines. Monitoring this ratio closely is important to assess the company's ability to meet its interest obligations and manage its debt effectively.