International Business Machines (IBM)
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 | 7,517,000 | 10,285,000 | 2,229,000 | 7,022,000 | 5,518,000 |
| Interest expense | US$ in thousands | 1,712,000 | 1,607,000 | 1,216,000 | 1,155,000 | 1,288,000 |
| Interest coverage | 4.39 | 6.40 | 1.83 | 6.08 | 4.28 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $7,517,000K ÷ $1,712,000K
= 4.39
The interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. Looking at the data for International Business Machines (IBM), we observe fluctuations in the interest coverage ratio over the years:
1. December 31, 2020: Interest Coverage of 4.28
2. December 31, 2021: Interest Coverage of 6.08
3. December 31, 2022: Interest Coverage of 1.83
4. December 31, 2023: Interest Coverage of 6.40
5. December 31, 2024: Interest Coverage of 4.39
A higher interest coverage ratio indicates that a company is more capable of meeting its interest obligations from its earnings. In 2021 and 2023, IBM showed improved interest coverage ratios of 6.08 and 6.40, respectively, suggesting a stronger ability to cover interest expenses. However, the ratio dropped significantly in 2022 to 1.83, indicating a potential strain on meeting interest payments that year.
Overall, it is essential for IBM to maintain a healthy interest coverage ratio to demonstrate financial stability and ensure it can meet its debt obligations comfortably. The company should closely monitor this ratio to assess its financial health and make necessary adjustments to manage its interest payments effectively.
Peer comparison
Dec 31, 2024