Chevron Corp (CVX)

Interest coverage

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	28,100,000	28,309,000	50,190,000	23,263,000	-6,196,000
Interest expense	US$ in thousands	594,000	469,000	516,000	712,000	697,000
Interest coverage		47.31	60.36	97.27	32.67	-8.89

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $28,100,000K ÷ $594,000K
= 47.31

Interest coverage is a critical financial ratio that indicates a company's ability to meet its interest obligations on outstanding debt. Looking at Chevron Corp's interest coverage ratio over the years from 2020 to 2024, we observe fluctuations in the company's ability to cover its interest expenses.

As of December 31, 2020, Chevron's interest coverage ratio was negative at -8.89. This implies that the company's earnings were insufficient to cover its interest expenses, raising concerns about its financial stability and ability to meet debt obligations.

However, there was a significant improvement in the interest coverage ratio by December 31, 2021, with a ratio of 32.67. This indicates that Chevron's earnings were more than sufficient to cover its interest expenses, reflecting a healthier financial position compared to the previous year.

The trend continued to show improvement in the following years, with the interest coverage ratios of 97.27, 60.36, and 47.31 for the years 2022, 2023, and 2024, respectively. These ratios suggest that Chevron maintained a strong ability to meet its interest obligations, indicating financial stability and sound management of debt.

Overall, Chevron Corp's interest coverage ratio improved significantly from 2020 to 2024, reflecting a positive trend in the company's ability to manage its debt and meet interest payments. This improvement indicates a strengthening financial position and suggests that Chevron is effectively generating earnings to cover its financial obligations.