Polaris Industries Inc (PII)
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 | 277,800 | 700,900 | 834,100 | 664,800 | 202,000 |
| Interest expense | US$ in thousands | 137,000 | 125,000 | 71,700 | 44,200 | 66,700 |
| Interest coverage | 2.03 | 5.61 | 11.63 | 15.04 | 3.03 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $277,800K ÷ $137,000K
= 2.03
The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt. In the case of Polaris Industries Inc, the interest coverage ratio has shown variability over the past five years.
As of December 31, 2020, Polaris had an interest coverage ratio of 3.03, indicating that the company generated enough operating income to cover its interest expense by approximately three times.
By December 31, 2021, the interest coverage ratio improved significantly to 15.04, suggesting a strong ability to meet interest payments from operating earnings. This favorable ratio continued into the following year as of December 31, 2022, with a ratio of 11.63.
However, there was a decline in the interest coverage ratio by December 31, 2023, as it dropped to 5.61. This decrease may indicate a relative weakening in Polaris' ability to cover its interest obligations from operating income.
The trend continued to worsen by December 31, 2024, with an interest coverage ratio of 2.03, reflecting a significant decrease in the company's ability to meet interest payments from its earnings.
Overall, while Polaris Industries Inc experienced fluctuations in its interest coverage ratio over the years, it is essential for the company to maintain a healthy interest coverage ratio to ensure its financial stability and ability to service its debt obligations.