Pfizer Inc (PFE)

Interest coverage

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Earnings before interest and tax (EBIT)	US$ in thousands	3,213,000	35,938,000	25,122,000	10,978,000	18,182,000
Interest expense	US$ in thousands	2,209,000	1,238,000	1,291,000	1,449,000	1,573,000
Interest coverage		1.45	29.03	19.46	7.58	11.56

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $3,213,000K ÷ $2,209,000K
= 1.45

Interest coverage ratio measures a company's ability to pay its interest expenses on outstanding debt using its operating income. A higher interest coverage ratio indicates a stronger ability to meet interest obligations.

Looking at Pfizer Inc.'s interest coverage ratio over the past five years, we observe a fluctuating trend. In 2023, the interest coverage ratio was 8.68, which indicates that the company generated operating income 8.68 times greater than its interest expenses for that year. This represents a decrease from the exceptionally high ratio of 39.25 in 2022.

The sharp decline in 2023 may suggest a potential decrease in operating income relative to interest expenses, which could indicate increased financial risk for the company. However, the ratio of 8.68 still signifies a comfortable margin of safety in meeting interest obligations.

Comparing the 2023 ratio to earlier years, we see that Pfizer Inc. had a notably higher interest coverage ratio in 2022 and 2021 compared to 2020 and 2019. This indicates variations in the company's ability to cover its interest expenses, with 2022 being a standout year in terms of robust interest coverage.

In conclusion, while the 2023 interest coverage ratio for Pfizer Inc. has decreased significantly from the previous year, it remains at a level that suggests the company has the capacity to meet its interest payments. However, further monitoring of the trend in interest coverage is advisable to assess the company's financial health and ability to service its debt obligations effectively.