Aramark Holdings (ARMK)

Interest coverage

		Sep 30, 2024	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	706,500	1,292,980	637,478	282,247	-258,379
Interest expense	US$ in thousands	366,716	441,262	381,533	413,713	389,434
Interest coverage		1.93	2.93	1.67	0.68	-0.66

September 30, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $706,500K ÷ $366,716K
= 1.93

The interest coverage ratio measures a company's ability to meet its interest obligations on debt with its operating income. A higher interest coverage ratio indicates a stronger ability to cover interest costs.

Looking at Aramark Holdings' interest coverage ratios over the past five years, we observe a fluctuating trend. In 2024, the interest coverage ratio was 1.93, which indicates that the company generated sufficient operating income to cover its interest expenses, albeit with a smaller margin compared to previous years.

In 2023, the interest coverage ratio improved significantly to 2.93, suggesting a stronger ability to meet interest obligations. However, in 2022, the ratio declined to 1.67, indicating a slight decrease in the company's ability to cover interest costs.

Furthermore, in 2021, the interest coverage ratio was 0.68, signaling a potential concern as the company's operating income may not have been adequate to cover its interest expenses. The negative interest coverage ratio of -0.66 in 2020 is particularly concerning, indicating that the company's operating income was insufficient to cover its interest payments during that period.

Overall, the fluctuating trend in Aramark Holdings' interest coverage ratios over the past five years suggests some variability in the company's ability to cover interest expenses with its operating income. It is essential for the company to maintain a stable and healthy interest coverage ratio to ensure financial stability and avoid potential liquidity issues.