McKesson Corporation (MCK)

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	3,883,000	4,713,000	1,928,000	-5,017,000	1,167,000
Interest expense	US$ in thousands	252,000	248,000	178,000	217,000	249,000
Interest coverage		15.41	19.00	10.83	-23.12	4.69

March 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $3,883,000K ÷ $252,000K
= 15.41

The interest coverage ratio of McKesson Corporation has exhibited varying trends over the past five years. In the most recent fiscal year ending March 31, 2024, the interest coverage ratio stood at 15.41, indicating that the company earned 15.41 times the amount needed to cover its interest expense. This reflects a slight decrease from the previous year's ratio of 19.00.

The performance in 2024 demonstrates a healthy ability to meet interest obligations with operating income. However, it is essential to note that the interest coverage ratio was significantly lower in fiscal year 2021 at 10.83, suggesting a decrease in the company's ability to cover interest expenses relative to the prior year.

Interestingly, in March 2021, McKesson Corporation experienced a negative interest coverage ratio of -23.12, indicating that the company's earnings were insufficient to cover its interest expenses during that period. This red flag could signal potential financial distress or operational challenges within the business at that time. The subsequent improvement in the interest coverage ratio in the following years, particularly the significant recovery in 2022 and the strong performance in 2023, reflects the company's efforts to enhance its financial health and operational efficiency.

Overall, the recent interest coverage ratios suggest that McKesson Corporation is currently in a more stable financial position compared to the fluctuations observed in the earlier years. Monitoring this ratio consistently can provide valuable insights into the company's ability to manage its debt obligations and generate sufficient earnings to cover interest expenses.