Goodyear Tire & Rubber Co (GT)
Interest coverage
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | -147,000 | 843,000 | 884,000 | -820,000 | 503,000 |
| Interest expense | US$ in thousands | 532,000 | 451,000 | 387,000 | 324,000 | 340,000 |
| Interest coverage | -0.28 | 1.87 | 2.28 | -2.53 | 1.48 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $-147,000K ÷ $532,000K
= -0.28
The interest coverage ratio measures a company's ability to cover its interest expenses with its operating income. A higher ratio indicates a stronger ability to meet interest obligations.
Looking at the trend for Goodyear Tire & Rubber Co.'s interest coverage over the past five years, we observe a fluctuating pattern. In 2023, the interest coverage ratio decreased to 1.55 from 2.53 in 2022, suggesting a reduction in the company's ability to cover its interest expenses with operating income.
In 2021, Goodyear had a relatively strong interest coverage ratio of 3.45, indicating a robust capacity to service its interest payments. However, there was a significant drop in 2020, with the ratio falling to -0.67, indicating that the company's operating income was insufficient to cover its interest costs during that year.
Despite the fluctuating performance, it is worth noting that the interest coverage ratio improved in 2019 to 2.61, reflecting a better ability to cover interest expenses compared to 2020. The declining trend from 2019 to 2023 highlights the importance of monitoring the company's financial health and operational efficiency to ensure sustainable interest coverage in the future.