PriceSmart Inc (PSMT)

Interest coverage

		Feb 29, 2024	Nov 30, 2023	Aug 31, 2023	May 31, 2023	Feb 28, 2023	Nov 30, 2022	Aug 31, 2022	May 31, 2022	Feb 28, 2022	Nov 30, 2021	Aug 31, 2021	May 31, 2021	Feb 28, 2021	Nov 30, 2020	Aug 31, 2020	May 31, 2020	Feb 29, 2020	Nov 30, 2019	Aug 31, 2019	May 31, 2019
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	196,572	187,112	180,176	185,001	172,493	170,168	166,003	159,301	161,678	158,669	154,142	153,124	141,930	136,893	123,498	125,500	124,976	121,498	114,690	109,873
Interest expense (ttm)	US$ in thousands	11,566	11,087	11,020	11,097	11,146	10,770	9,611	8,177	6,977	6,767	7,210	8,366	9,334	8,796	7,625	6,106	4,457	3,768	3,939	4,411
Interest coverage		17.00	16.88	16.35	16.67	15.48	15.80	17.27	19.48	23.17	23.45	21.38	18.30	15.21	15.56	16.20	20.55	28.04	32.24	29.12	24.91

February 29, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $196,572K ÷ $11,566K
= 17.00

Interest coverage ratio is a financial metric used to evaluate a company's ability to pay its interest expenses on outstanding debt. It is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expenses. A higher interest coverage ratio indicates a stronger ability to cover interest obligations.

Based on the historical data provided for PriceSmart Inc, we observe fluctuations in the interest coverage ratio over time. The interest coverage ratio ranges from a low of 15.21 to a high of 32.24, indicating variations in the company's ability to cover its interest expenses.

Analyzing the trend, we note that the interest coverage ratio generally fluctuates around a range of 15 to 30, with some quarters showing higher ratios above 20. This suggests that PriceSmart Inc has been able to consistently generate sufficient operating income to cover its interest expenses over the periods examined.

The highest interest coverage ratios observed indicate a strong ability to service debt obligations comfortably, while the lower ratios suggest potential challenges in meeting interest payments. It is important for investors and creditors to monitor this ratio to assess the company's risk of financial distress and its capacity to meet debt obligations.

Overall, the interest coverage ratio for PriceSmart Inc reflects a generally adequate financial health in terms of meeting interest obligations, but continued monitoring of this ratio is necessary to assess the company's ongoing ability to service its debt.