Acuity Brands Inc (AYI)
Interest coverage
| Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | Aug 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 474,600 | 520,900 | 420,400 | 351,100 | 461,300 |
| Interest expense | US$ in thousands | 27,900 | 27,000 | 24,200 | 26,400 | 36,400 |
| Interest coverage | 17.01 | 19.29 | 17.37 | 13.30 | 12.67 |
August 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $474,600K ÷ $27,900K
= 17.01
Interest coverage ratio is an important financial metric that measures a company's ability to meet its interest obligations on outstanding debt. It is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expenses. A higher interest coverage ratio indicates a greater ability to cover interest expenses from operating income.
In the case of Acuity Brands, Inc., the interest coverage ratio has shown a consistent upward trend over the past five years, indicating a strengthening ability to cover interest expenses. The ratio has increased from 13.95 in 2019 to 26.47 in 2023, demonstrating a substantial improvement in the company's ability to meet its interest obligations.
This trend reflects positively on the company's financial health and its ability to manage its debt obligations. A higher interest coverage ratio provides reassurance to creditors and investors, as it suggests that the company is less vulnerable to defaulting on its debt payments.
The increasing trend in Acuity Brands, Inc.'s interest coverage ratio may be attributed to factors such as improved operating efficiency, higher EBIT, or reduced interest expenses. Overall, a consistently improving interest coverage ratio indicates that the company has been effectively managing its interest obligations and is in a stronger financial position to support its debt burden.
Peer comparison
Aug 31, 2023