Dollar General Corporation (DG)

Interest coverage

		Jan 31, 2025	Oct 31, 2024	Jul 31, 2024	Apr 30, 2024	Feb 2, 2024	Jan 31, 2024	Nov 3, 2023	Oct 31, 2023	Aug 4, 2023	Jul 31, 2023	May 5, 2023	Apr 30, 2023	Feb 3, 2023	Jan 31, 2023	Oct 31, 2022	Oct 28, 2022	Jul 31, 2022	Jul 29, 2022	Apr 30, 2022	Apr 29, 2022
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	1,390,272	1,675,720	2,255,374	2,138,886	2,026,256	2,138,916	2,251,576	2,558,960	2,866,344	3,107,204	3,348,064	3,342,336	3,336,608	3,316,860	3,297,112	3,308,139	3,319,166	3,202,409	3,085,652	3,005,083
Interest expense (ttm)	US$ in thousands	274,320	285,529	294,797	308,956	318,812	326,032	333,252	334,001	334,750	325,231	315,712	286,355	256,998	225,278	193,558	179,553	165,548	160,956	156,364	155,886
Interest coverage		5.07	5.87	7.65	6.92	6.36	6.56	6.76	7.66	8.56	9.55	10.60	11.67	12.98	14.72	17.03	18.42	20.05	19.90	19.73	19.28

January 31, 2025 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $1,390,272K ÷ $274,320K
= 5.07

Interest coverage is a financial ratio that indicates a company's ability to meet its interest obligations on outstanding debt. A higher interest coverage ratio is generally seen as favorable, as it suggests that the company has more than enough operating income to cover its interest expenses.

Based on the data provided for Dollar General Corporation, the interest coverage ratio has displayed a declining trend over the period from April 29, 2022, to January 31, 2025. The ratio started at 19.28 in April 2022 and gradually decreased to 5.07 by January 2025.

The declining trend in Dollar General's interest coverage ratio may raise concerns about the company's ability to comfortably meet its interest payments on debt obligations. A decreasing interest coverage ratio could indicate increasing financial risk for the company, as it suggests a lower margin of safety in meeting its interest expenses.

Investors and creditors typically pay close attention to the interest coverage ratio as it provides insight into a company's financial health and ability to manage debt. It is important for Dollar General to monitor its interest coverage ratio closely and take necessary steps to improve it, such as increasing operating income or reducing interest expenses, to maintain financial stability and reassure stakeholders.