Lear Corporation (LEA)

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	839,100	1,054,000	605,500	672,900	593,400
Interest expense	US$ in thousands	106,200	101,100	98,600	91,800	99,600
Interest coverage		7.90	10.43	6.14	7.33	5.96

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $839,100K ÷ $106,200K
= 7.90

Interest coverage is a critical financial ratio that indicates a company's ability to meet its interest payment obligations from its operating income. In the case of Lear Corporation, the interest coverage has shown a generally positive trend over the years.

As of December 31, 2020, Lear Corporation had an interest coverage of 5.96, indicating that the company's operating income was able to cover its interest expenses nearly 6 times. This suggests a moderate ability to meet interest obligations.

By December 31, 2021, the interest coverage ratio improved to 7.33, showing a stronger ability to cover interest payments from operating income. The increase in this ratio could indicate either an increase in operating income, a decrease in interest expenses, or a combination of both.

In 2022, the interest coverage ratio slightly decreased to 6.14, which is still at a reasonable level but lower than the previous year. This could be a result of changes in the company's financial structure or operating performance.

The year 2023 saw a significant improvement in the interest coverage ratio to 10.43, indicating a substantial increase in Lear Corporation's ability to cover its interest expenses from operating income. This could be a result of increased profitability or lower interest expenses.

By December 31, 2024, the interest coverage ratio stood at 7.90, showing a solid ability to meet interest payments from operating income. Overall, the trend in Lear Corporation's interest coverage reflects varying levels of financial health and the company's ability to manage its interest obligations.