Costco Wholesale Corp (COST)
Interest coverage
| Sep 3, 2023 | Aug 28, 2022 | Aug 29, 2021 | Aug 30, 2020 | Sep 1, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 8,647,000 | 7,927,000 | 6,779,000 | 5,470,000 | 4,870,000 |
| Interest expense | US$ in thousands | 160,000 | 158,000 | 171,000 | 160,000 | 150,000 |
| Interest coverage | 54.04 | 50.17 | 39.64 | 34.19 | 32.47 |
September 3, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $8,647,000K ÷ $160,000K
= 54.04
The interest coverage ratio measures a company's ability to meet its interest payment obligations with its operating income. A higher ratio indicates that the company is more capable of covering its interest expenses.
Looking at Costco Wholesale Corp's interest coverage over the past five years, we can observe fluctuations in the ratio. In September 2019, the interest coverage ratio was quite high at 197.38, indicating a strong ability to cover interest expenses with operating income.
However, there was a significant decrease in the interest coverage ratio in August 2021 to 51.60, which suggests that the company's ability to cover interest payments with operating income had weakened. It's important to note that a ratio of less than 1 would imply that the company is not generating enough operating income to cover its interest expenses.
In the subsequent years, the interest coverage ratio improved, reaching 80.34 in August 2022 and 76.55 in August 2020. While these figures are lower than the ratio in 2019, they still indicate an adequate ability to cover interest expenses with operating income.
Overall, the trend in Costco Wholesale Corp's interest coverage suggests some volatility but generally reflects a reasonable ability to meet its interest payment obligations from operating income. Investors and stakeholders should continue to monitor this ratio, as a declining trend could indicate potential financial challenges.
Peer comparison
Sep 3, 2023