Dollar General Corporation (DG)

Interest coverage

		Jan 31, 2025	Feb 2, 2024	Jan 31, 2024	Feb 3, 2023	Jan 31, 2023
Earnings before interest and tax (EBIT)	US$ in thousands	1,714,070	2,446,300	2,446,300	3,327,890	3,327,890
Interest expense	US$ in thousands	274,320	326,781	326,781	211,273	211,273
Interest coverage		6.25	7.49	7.49	15.75	15.75

January 31, 2025 calculation

Interest coverage = EBIT ÷ Interest expense
= $1,714,070K ÷ $274,320K
= 6.25

Based on the provided data, Dollar General Corporation's interest coverage ratio has shown a declining trend over the past three years. In January 2023 and February 2023, the interest coverage ratio was consistent at 15.75, indicating that the company was earning 15.75 times the amount needed to cover its interest expenses. However, the ratio significantly dropped to 7.49 in January and February 2024, and further decreased to 6.25 in January 2025.

This decline in the interest coverage ratio suggests that Dollar General may be facing challenges in generating sufficient earnings to cover its interest payments. A lower interest coverage ratio can indicate higher financial risk and may raise concerns among investors and creditors about the company's ability to meet its debt obligations in the long term. Management should closely monitor the trend in the interest coverage ratio and take necessary steps to improve the company's financial health and stability.