McCormick & Company Incorporated (MKC)
Interest coverage
| Nov 30, 2024 | Nov 30, 2023 | Nov 30, 2022 | Nov 30, 2021 | Nov 30, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 1,181,900 | 1,063,300 | 999,700 | 1,084,600 | 1,057,900 |
| Interest expense | US$ in thousands | 209,400 | 208,200 | 149,100 | 136,600 | 135,600 |
| Interest coverage | 5.64 | 5.11 | 6.70 | 7.94 | 7.80 |
November 30, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $1,181,900K ÷ $209,400K
= 5.64
Interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt. A higher interest coverage ratio indicates a company is more capable of servicing its debt.
Analyzing the interest coverage ratios of McCormick & Company Incorporated over the past five years reveals a relatively stable trend. In November 2020, the interest coverage ratio was 7.80, showing that the company generated 7.80 times the earnings needed to cover its interest expenses. This ratio increased slightly to 7.94 in November 2021, suggesting a slightly improved ability to cover interest payments.
However, the interest coverage ratio dipped in the following years. By November 2022, the ratio decreased to 6.70, indicating a decline in the company's ability to cover interest costs. This declining trend continued in November 2023, with the interest coverage ratio falling to 5.11, indicating a significant decrease in earnings relative to interest expenses.
Although there was a slight improvement in November 2024, with the interest coverage ratio rising to 5.64, the overall trend of declining interest coverage ratios raises concerns about the company's ability to meet its interest obligations in the future.
In conclusion, while McCormick & Company Incorporated has maintained a relatively stable interest coverage ratio over the past five years, the recent decline in this ratio highlights the importance of closely monitoring the company's financial performance and debt management strategies to ensure its long-term financial health.