Oracle Corporation (ORCL)
Interest coverage
| May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 15,255,000 | 12,631,000 | 10,404,000 | 15,495,000 | 14,058,000 |
| Interest expense | US$ in thousands | 3,514,000 | 3,505,000 | 2,755,000 | 2,496,000 | 1,995,000 |
| Interest coverage | 4.34 | 3.60 | 3.78 | 6.21 | 7.05 |
May 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $15,255,000K ÷ $3,514,000K
= 4.34
The interest coverage ratio measures a company's ability to pay its interest expenses on outstanding debt. A higher ratio indicates that the company is more capable of meeting its interest obligations.
Looking at Oracle Corporation's interest coverage over the past five years, we observe a declining trend. The interest coverage ratio has decreased from 7.05 in 2020 to 4.34 in 2024. This decline suggests that Oracle's ability to cover its interest expenses with operating income has weakened over time.
While a ratio of 4.34 in 2024 still indicates that Oracle is generating enough operating income to cover its interest expenses, investors may be concerned about the downward trend in the company's interest coverage. It is essential for Oracle to closely monitor its financial performance and ensure that it continues to generate sufficient income to meet its interest obligations in the future.
Peer comparison
May 31, 2024