AutoZone Inc (AZO)

Interest coverage

		Aug 26, 2023	Aug 27, 2022	Aug 28, 2021	Aug 29, 2020	Aug 31, 2019
Earnings before interest and tax (EBIT)	US$ in thousands	3,487,740	3,277,970	2,951,520	2,424,540	2,225,000
Interest expense	US$ in thousands	320,121	198,883	202,326	208,021	193,671
Interest coverage		10.90	16.48	14.59	11.66	11.49

August 26, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $3,487,740K ÷ $320,121K
= 10.90

The interest coverage ratio measures a company's ability to meet its interest payment obligations on its outstanding debt. It is calculated by dividing the earnings before interest and taxes (EBIT) by the interest expense. A higher interest coverage ratio indicates a greater capacity to meet interest payments.

Looking at the interest coverage ratios of Autozone Inc. over the past five years, we can see a relatively consistent and healthy trend. In 2019, the interest coverage ratio was 11.99, indicating that the company generated almost 12 times the amount of earnings to cover its interest expenses. This ratio improved in 2020 to 12.02 before further increasing to 15.07 in 2021, reflecting a solid ability to cover interest payments with earnings.

The interest coverage ratio reached its peak in 2022 at 17.07, suggesting a significant increase in the company's ability to meet its interest obligations. This indicates improved financial stability and a strong earnings base. In the most recent year, 2023, the interest coverage ratio decreased slightly to 11.34 but still remained robust.

Overall, Autozone Inc. has consistently demonstrated a strong ability to cover its interest expenses over the past five years, which is a positive indicator of its financial health and stability. However, the slight decrease in the most recent year's ratio may warrant further investigation into the reasons behind this change.