Ligand Pharmaceuticals Incorporated (LGND)

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	62,651	9,668	72,609	19,124	832,384
Interest expense	US$ in thousands	656	1,799	19,619	27,415	35,745
Interest coverage		95.50	5.37	3.70	0.70	23.29

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $62,651K ÷ $656K
= 95.50

The interest coverage ratio for Ligand Pharmaceuticals, Inc. indicates the company's ability to meet its interest payment obligations with its earnings before interest and taxes (EBIT). In 2021, the interest coverage ratio was 4.21, showing that the company's operating income was sufficient to cover its interest expenses comfortably. This signifies a positive trend compared to the previous years, where the company's ability to cover interest costs was weaker.

In 2020, the interest coverage ratio was 0.45, indicating a lower ability to cover interest expenses with operating income, which can be a concern as it suggests a relatively higher financial risk. The negative interest coverage ratio in 2019 (-0.39) indicates that the company's EBIT was insufficient to cover its interest expenses, which could raise concerns about the company's financial health and ability to meet its debt obligations.

Overall, the improving trend in interest coverage from 2019 to 2021 is a positive sign, suggesting that Ligand Pharmaceuticals, Inc. has been able to generate more operating income relative to its interest expenses. However, it is important for the company to maintain a healthy interest coverage ratio to ensure its financial stability and ability to service its debt obligations in the long term.