Amgen Inc (AMGN)

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	7,764,000	7,897,000	8,832,000	9,144,000	9,328,000
Interest expense	US$ in thousands	3,155,000	2,875,000	1,406,000	1,197,000	1,262,000
Interest coverage		2.46	2.75	6.28	7.64	7.39

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $7,764,000K ÷ $3,155,000K
= 2.46

The interest coverage ratio is a financial metric that indicates a company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT). A higher interest coverage ratio typically suggests a lower risk of default on its debt obligations.

Analyzing the interest coverage ratios of Amgen Inc over the past five years from 2020 to 2024, we can see the following trends:

1. In December 31, 2020, the interest coverage ratio was 7.39, indicating that Amgen's earnings were 7.39 times the amount needed to cover its interest expenses. This ratio suggests a strong ability to meet interest obligations.

2. By December 31, 2021, the interest coverage ratio improved slightly to 7.64, reflecting continued solid performance in covering interest expenses.

3. However, in December 31, 2022, the interest coverage ratio decreased to 6.28, which may indicate a slight decline in Amgen's ability to cover interest payments compared to the previous year.

4. The trend worsened significantly in December 31, 2023, with the interest coverage ratio dropping to 2.75. This suggests a notable decrease in Amgen's ability to cover its interest expenses, potentially raising concerns about the company's ability to meet its debt obligations comfortably.

5. By December 31, 2024, the interest coverage ratio further decreased to 2.46, indicating a continued decline in Amgen's ability to cover its interest expenses, which could pose risks in terms of debt repayment.

Overall, the trend in Amgen Inc's interest coverage ratios shows a general decrease over the five-year period, with the ratio falling significantly in the most recent years. This declining trend may signify a weakening financial position in terms of the company's ability to service its debt obligations from its operating profits. It is essential for Amgen to carefully monitor and manage its interest coverage ratio to ensure sustainable financial health and minimize the risk of financial distress.