Goodyear Tire & Rubber Co (GT)
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 | 677,000 | -145,000 | 890,000 | 939,000 | -790,000 |
| Interest expense | US$ in thousands | 522,000 | 532,000 | 451,000 | 387,000 | 324,000 |
| Interest coverage | 1.30 | -0.27 | 1.97 | 2.43 | -2.44 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $677,000K ÷ $522,000K
= 1.30
The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt. A higher ratio indicates a stronger ability to cover interest expenses with operating income.
Based on the data provided for Goodyear Tire & Rubber Co:
1. As of December 31, 2020, the interest coverage ratio was -2.44. This suggests that the company's operating income was insufficient to cover its interest expenses, indicating a potential financial strain.
2. By December 31, 2021, the interest coverage ratio improved significantly to 2.43, indicating that the company's operating income was more than sufficient to cover its interest obligations, reflecting improved financial performance.
3. However, by December 31, 2022, the interest coverage ratio decreased to 1.97, though still above 1, indicating that the company's ability to cover interest expenses slightly weakened compared to the previous year.
4. The ratio further declined to -0.27 as of December 31, 2023, indicating a concerning situation where the company's operating income was insufficient to cover its interest expenses, potentially signaling financial distress.
5. As of December 31, 2024, the interest coverage ratio improved to 1.30, but it remained relatively low, suggesting the company's ability to cover interest payments was still tight.
Overall, the trend in Goodyear Tire & Rubber Co's interest coverage ratio shows fluctuations, with periods of both improvement and deterioration. It is important for the company to maintain a healthy interest coverage ratio to ensure financial stability and sustainability in the long term.