Microchip Technology Inc (MCHP)

Interest coverage

		Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	659,900	1,162,500	1,892,300	2,564,200	3,158,700	3,440,200	3,312,200	3,113,600	2,801,300	2,489,900	2,067,100	1,739,500	1,424,900	1,024,600	877,100	696,400	635,200	662,200	663,200	647,700
Interest expense (ttm)	US$ in thousands	112,800	225,200	212,900	198,300	190,700	194,300	200,800	203,900	214,200	223,500	235,000	257,000	277,200	301,600	330,100	356,900	394,300	427,500	463,800	497,300
Interest coverage		5.85	5.16	8.89	12.93	16.56	17.71	16.50	15.27	13.08	11.14	8.80	6.77	5.14	3.40	2.66	1.95	1.61	1.55	1.43	1.30

December 31, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $659,900K ÷ $112,800K
= 5.85

The interest coverage ratio of Microchip Technology Inc has shown a positive trend over the analyzed period, indicating an improving ability to cover interest expenses with operating income. From March 31, 2020, to December 31, 2024, the interest coverage ratio increased steadily from 1.30 to a peak of 17.71 on September 30, 2023, before declining to 5.85 by the end of December 31, 2024.

The company's interest coverage ratio surpassed the commonly accepted minimum threshold of 1.5 throughout the period, indicating a healthy ability to meet interest obligations. The significant increase in the ratio from 2020 to 2023 demonstrates the company's improved financial performance and capacity to service its debt.

However, the slight decline in the interest coverage ratio in the last quarter of 2024 warrants monitoring to ensure the company can maintain adequate profitability to cover its interest expenses in the future. Overall, the trend indicates a positive financial position for Microchip Technology Inc in terms of meeting its interest payment obligations.