Rambus Inc (RMBS)
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 | 183,009 | 188,650 | -5,951 | 33,992 | -26,199 |
Interest expense | US$ in thousands | 1,416 | 1,490 | 1,874 | 10,706 | 10,340 |
Interest coverage | 129.24 | 126.61 | -3.18 | 3.18 | -2.53 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $183,009K ÷ $1,416K
= 129.24
Interest coverage ratio is a financial metric that indicates 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 is generally preferable as it shows the company has more earnings to cover its interest payments.
Analyzing the interest coverage ratios of Rambus Inc from 2020 to 2024, we can observe fluctuations in the company's ability to cover its interest expenses. In 2020, the interest coverage ratio was negative at -2.53, indicating that the company's EBIT was insufficient to cover its interest expenses, which may raise concerns about its financial health.
However, there was a significant improvement in 2021, as the interest coverage ratio increased to 3.18, suggesting that Rambus Inc's earnings were more than three times its interest expenses. This improvement indicates a stronger ability to meet its interest obligations.
The ratio declined sharply in 2022 to -3.18, indicating a negative EBIT compared to interest expenses, which could signal financial distress for the company during that period.
Rambus Inc experienced a substantial recovery in its interest coverage in 2023 and 2024, with ratios of 126.61 and 129.24 respectively. These exceptionally high ratios demonstrate a significant improvement in the company's financial strength, indicating that it is generating significantly more earnings than needed to cover its interest payments, reflecting a healthier financial position.
Overall, the trend in Rambus Inc's interest coverage ratios indicates fluctuations over the years, with notable improvements in recent years that suggest an enhanced ability to service its interest obligations.
Peer comparison
Dec 31, 2024