MGM Resorts International (MGM)

Interest coverage

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	1,560,300	1,933,060	-2,152,760	374,894	-835,099
Interest expense	US$ in thousands	443,230	460,293	594,954	799,593	676,380
Interest coverage		3.52	4.20	-3.62	0.47	-1.23

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $1,560,300K ÷ $443,230K
= 3.52

The interest coverage ratio is a financial metric that indicates a company's ability to meet its interest obligations on outstanding debt. A higher interest coverage ratio suggests that the company is more capable of servicing its debt obligations.

Analyzing the interest coverage ratios of MGM Resorts International over the years provided:
- As of December 31, 2020, the interest coverage ratio was -1.23, which indicates that the company's operating income was insufficient to cover its interest expenses.
- By December 31, 2021, the interest coverage ratio improved to 0.47, but it still suggests that the company may have been facing challenges in meeting interest payments with its operating income.
- The ratio significantly worsened by December 31, 2022, with a ratio of -3.62, indicating a substantial decline in the company's ability to cover its interest costs with operating income.
- However, there was a noteworthy improvement by December 31, 2023, with an interest coverage ratio of 4.20, signifying that the company's operating income was more than sufficient to cover its interest expenses.
- The ratio remained healthy by December 31, 2024, at 3.52, indicating continued strength in the company's ability to meet its interest obligations with its operating earnings.

Overall, the trend in MGM Resorts International's interest coverage ratio shows fluctuations over the years, with significant improvements in recent years, implying a better ability to meet interest payments using operating income. Investors and lenders may find this improvement encouraging, as it suggests increased financial stability and a reduced risk of defaulting on debt obligations.