Cisco Systems Inc (CSCO)

Interest coverage

		Jul 31, 2025	Jul 31, 2024	Jul 27, 2024	Jul 31, 2023	Jul 29, 2023
Earnings before interest and tax (EBIT)	US$ in thousands	13,048,000	13,240,000	12,181,000	15,745,000	15,745,000
Interest expense	US$ in thousands	1,593,000	1,006,000	1,006,000	427,000	427,000
Interest coverage		8.19	13.16	12.11	36.87	36.87

July 31, 2025 calculation

Interest coverage = EBIT ÷ Interest expense
= $13,048,000K ÷ $1,593,000K
= 8.19

The interest coverage ratios for Cisco Systems Inc. over the specified periods indicate noteworthy fluctuations that warrant a detailed examination. As of July 29 and July 31, 2023, the interest coverage stood at 36.87, reflecting a highly comfortable position in terms of the company's ability to meet its interest obligations from its earnings before interest and taxes (EBIT). This ratio suggests that Cisco’s EBIT exceeds interest expenses by a substantial margin, providing a strong buffer against potential financial stress.

Moving forward to the fiscal year ending July 27 and July 31, 2024, a significant decline is observed in the interest coverage ratios, decreasing to 12.11 and 13.16 respectively. Although still above the generally acceptable threshold (typically around 3 to 4 times), this reduction indicates a tightening in Cisco’s capacity to cover interest expenses solely from operating earnings. The diminished ratio could be attributed to either increased interest expenses, decreased EBIT, or a combination of both, reflecting a potential shift in the company’s financial leverage or profitability.

By July 31, 2025, the interest coverage further diminishes to 8.19. While this ratio remains above critical concern levels, the downward trend underscores a continued weakening of the company’s ability to comfortably meet interest obligations through operating income. This pattern may signal increased leverage or cost factors impacting profitability.

Overall, the trajectory of Cisco’s interest coverage ratios from over 36 in 2023 to around 8 in 2025 illustrates a progressive decline in financial cushion against interest obligations. Such a trend warrants ongoing monitoring, as further declines could signal emerging financial stress or changes in operating performance that may affect creditworthiness.