General Motors Company (GM)

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	9,365,000	9,298,000	12,584,000	13,666,000	9,193,000
Interest expense	US$ in thousands	846,000	11,374,000	987,000	950,000	1,098,000
Interest coverage		11.07	0.82	12.75	14.39	8.37

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $9,365,000K ÷ $846,000K
= 11.07

The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt. In the case of General Motors Company, the interest coverage ratios for the years ending December 31, 2020, 2021, 2022, 2023, and 2024 were 8.37, 14.39, 12.75, 0.82, and 11.07 respectively.

The trend in General Motors Company's interest coverage ratio shows fluctuations over the years. In 2020, the company had an interest coverage ratio of 8.37, indicating that it earned 8.37 times more operating income than the interest expenses incurred during that period. This ratio improved significantly in 2021 to 14.39, suggesting a stronger ability to cover interest obligations.

However, in 2022, the interest coverage ratio decreased to 12.75, albeit still at a healthy level. The significant drop in 2023 to 0.82 raises a concern, indicating that the company's operating income may not be sufficient to cover its interest expenses during that period.

In 2024, the interest coverage ratio rose to 11.07, showing some improvement compared to the previous year. Overall, General Motors Company needs to closely monitor its interest coverage ratio to ensure it maintains a healthy level, as a low ratio can signify financial distress and difficulty in meeting debt obligations.