Smith AO Corporation (AOS)
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 | 707,700 | 745,500 | 233,100 | 629,900 | 451,200 |
| Interest expense | US$ in thousands | 6,700 | 12,000 | 9,400 | 4,300 | 7,300 |
| Interest coverage | 105.63 | 62.12 | 24.80 | 146.49 | 61.81 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $707,700K ÷ $6,700K
= 105.63
Based on the provided data for Smith AO Corporation's interest coverage ratio over the five-year period, the company has shown fluctuation in its ability to cover interest expenses with its earnings.
- As of December 31, 2020, the interest coverage ratio stood at a solid 61.81, indicating that the company's earnings were sufficient to cover its interest payments nearly 62 times over. This suggests a healthy financial position and lower risk of default on interest payments.
- By December 31, 2021, the interest coverage ratio improved significantly to 146.49, reflecting a substantial increase in the company's ability to cover interest expenses with its earnings. This sharp improvement implies a strong financial performance and increased profitability.
- However, by December 31, 2022, the interest coverage ratio dropped to 24.80, indicating a decline in the company's ability to cover its interest obligations. This significant decrease may raise concerns about the company's financial stability and ability to meet debt obligations.
- Subsequently, by December 31, 2023, the interest coverage ratio recovered to 62.12, showing an improvement in the company's ability to cover interest payments compared to the previous year. This recovery suggests efforts to enhance profitability and manage interest expenses more effectively.
- Finally, as of December 31, 2024, the interest coverage ratio stood at 105.63, indicating a strong position in terms of covering interest obligations with earnings. This improvement compared to the previous year suggests a positive trend in the company's financial performance and risk management.
In conclusion, Smith AO Corporation's interest coverage ratio has shown variability over the years, with fluctuations reflecting changes in profitability and financial health. It is important for stakeholders to monitor these ratios closely to assess the company's ability to meet its debt obligations and manage financial risks effectively.
Peer comparison
Dec 31, 2024