Microchip Technology Inc (MCHP)

Interest coverage

		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	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	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	773,900	836,200	752,300
Interest expense (ttm)	US$ in thousands	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	518,100	536,000	545,000
Interest coverage		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	1.49	1.56	1.38

March 31, 2024 calculation

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

Interest coverage ratio is a financial metric used to assess a company's ability to meet its interest obligations on outstanding debt. It is calculated by dividing a company's earnings before interest and taxes (EBIT) by the interest expense. A higher interest coverage ratio indicates that the company is more capable of servicing its interest payments.

Analyzing the interest coverage ratios of Microchip Technology Inc over the past several quarters reveals a fluctuating trend. In the most recent quarter ending on March 31, 2024, the interest coverage ratio was 12.93, signaling a healthy ability to cover interest payments. This ratio has generally been on an upward trajectory from the end of 2021, peaking at 17.71 in September 2023.

However, it is worth noting that the interest coverage ratio has experienced significant fluctuations over the periods analyzed. There was a notable decline in the ratio in the latter half of 2021 and early 2022, with values dropping below 3, indicating a potential strain on the company's ability to meet its interest obligations during those periods.

Overall, while the recent interest coverage ratios of Microchip Technology Inc demonstrate an improved ability to cover interest expenses, the company has experienced volatility in this metric in the past. It is essential for investors and stakeholders to monitor this ratio closely to ensure the company's financial health and stability in meeting its debt obligations.