Graham Holdings Co (GHC)

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 1,210,860 367,668 175,744 484,201 446,052
Interest expense US$ in thousands 186,149 63,301 54,403 33,943 38,310
Interest coverage 6.50 5.81 3.23 14.27 11.64

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $1,210,860K ÷ $186,149K
= 6.50

The interest coverage ratio reflects Graham Holdings Co's ability to meet its interest obligations with its operating income. Looking at the data provided, we observe fluctuations in the interest coverage ratio over the years.

As of December 31, 2020, the interest coverage ratio stood at 11.64, indicating that the company generated more than enough operating income to cover its interest expenses comfortably. This suggests a strong financial position at that time.

By December 31, 2021, the interest coverage ratio improved further to 14.27, showing continued stability and an increased ability to service its debt obligations. This indicates a positive trend in the company's financial health.

However, there was a significant decline in the interest coverage ratio by December 31, 2022, dropping to 3.23. This sharp decrease may raise concerns about the company's ability to cover its interest expenses with its operating income, potentially indicating increased financial risk.

The interest coverage ratio showed some recovery by December 31, 2023, rising to 5.81. While the ratio improved, it remained below the levels seen in the earlier years, suggesting that the company might still be facing some challenges in meeting its interest obligations comfortably.

By December 31, 2024, the interest coverage ratio further improved to 6.50, indicating a continued effort to strengthen the company's ability to cover its interest expenses with operating income. However, it's important for stakeholders to monitor this ratio closely to ensure that the company can sustain its debt servicing capability over the long term.