Jazz Pharmaceuticals PLC (JAZZ)

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	708,448	587,367	-75,688	475,263	371,401
Interest expense	US$ in thousands	238,097	289,438	288,242	278,766	99,707
Interest coverage		2.98	2.03	-0.26	1.70	3.72

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $708,448K ÷ $238,097K
= 2.98

The interest coverage ratio for Jazz Pharmaceuticals PLC has displayed some fluctuations over the years. In December 31, 2020, the ratio stood at a healthy 3.72, indicating that the company's operating income was 3.72 times the amount needed to cover its interest expenses. However, by December 31, 2021, the ratio had decreased to 1.70, suggesting a potential strain on the company's ability to cover interest payments.

The situation escalated further as of December 31, 2022 when the interest coverage ratio turned negative, reaching -0.26. A negative ratio implies that the company's operating income was insufficient to cover its interest expenses, which could raise concerns about the company's financial health and ability to meet its debt obligations.

Fortunately, by December 31, 2023, Jazz Pharmaceuticals PLC managed to improve its interest coverage ratio to 2.03, indicating a better ability to cover its interest expenses with its operating income. The company continued to strengthen its position as of December 31, 2024, with an interest coverage ratio of 2.98.

Overall, it is crucial for Jazz Pharmaceuticals PLC to monitor and manage its interest coverage ratio effectively to ensure it maintains a healthy financial position and meets its debt obligations comfortably.