Microchip Technology Inc (MCHP)

Interest coverage

		Mar 31, 2024	Mar 31, 2023	Mar 31, 2022	Mar 31, 2021	Mar 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	2,564,200	3,113,600	1,739,500	696,400	647,700
Interest expense	US$ in thousands	198,300	203,900	257,000	356,900	497,300
Interest coverage		12.93	15.27	6.77	1.95	1.30

March 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $2,564,200K ÷ $198,300K
= 12.93

The interest coverage ratio of Microchip Technology Inc has displayed fluctuating trends over the past five years. In the fiscal year ending March 31, 2024, the interest coverage ratio stood at 12.93, indicating that the company's operating income was 12.93 times larger than its interest expenses for that period. This represents a strong ability to cover interest payments comfortably.

Comparing this to the previous years, we can observe a consistent improvement in the interest coverage ratio from 2020 to 2023, with values of 1.30, 1.95, and 6.77, respectively. This upward trend suggests that Microchip Technology Inc was progressively enhancing its ability to meet its interest obligations with its operating income during these years.

The substantial increase in the interest coverage ratio in 2023 to 15.27 from 6.77 in the previous year is particularly noteworthy, indicating a significant improvement in the company's financial performance in terms of covering interest expenses.

Overall, the interest coverage ratio fluctuations over the five-year period suggest that Microchip Technology Inc has made efforts to strengthen its financial position and ability to service its debt obligations through improved operational performance.