ON Semiconductor Corporation (ON)

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	1,767,700	2,608,700	2,455,500	1,286,600	342,800
Interest expense	US$ in thousands	11,100	74,800	94,900	130,400	168,400
Interest coverage		159.25	34.88	25.87	9.87	2.04

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $1,767,700K ÷ $11,100K
= 159.25

Interest coverage is a key financial ratio used to measure a company's ability to cover its interest expenses with its operating income. Looking at the data provided for ON Semiconductor Corporation, we observe a positive trend in the interest coverage ratio over the years.

As of December 31, 2020, the interest coverage ratio stood at 2.04, indicating that the company's operating income was just enough to cover its interest expenses. However, there has been a significant improvement in the company's ability to cover interest expenses in the following years.

By December 31, 2021, the interest coverage ratio increased to 9.87, suggesting a healthier financial position with a more comfortable cushion to cover interest obligations. This trend continued in subsequent years, with the ratios showing significant improvement: 25.87 by December 31, 2022, 34.88 by December 31, 2023, and a remarkable 159.25 by December 31, 2024.

The substantial increase in the interest coverage ratio reflects ON Semiconductor Corporation's strengthening financial performance and its ability to comfortably meet its interest payments from operating income. This improved coverage ratio indicates better financial health and reduced risk of potential financial distress related to servicing debt obligations.