Parsons Corp (PSN)

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	248,784	159,506	105,405	161,989	74,377
Interest expense	US$ in thousands	31,497	23,185	17,697	20,956	23,729
Interest coverage		7.90	6.88	5.96	7.73	3.13

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $248,784K ÷ $31,497K
= 7.90

The interest coverage ratio for Parsons Corp has shown a generally positive trend over the past five years, increasing from 3.13 in 2019 to 7.90 in 2023. This indicates the company's ability to meet its interest obligations from its earnings has been improving.

A ratio above 2 is generally considered healthy, as it suggests the company is generating enough operating income to cover the interest expenses. Parsons Corp's interest coverage ratios for the years in question are all comfortably above this threshold, indicating a strong ability to service its debt.

The consistent increase in the interest coverage ratio reflects improved financial health and stability for the company. It suggests that Parsons Corp is managing its debt effectively and has sufficient earnings to cover its interest payments, providing a positive signal to creditors and investors regarding the company's financial strength and ability to meet its debt obligations.