ResMed Inc (RMD)

Interest coverage

		Jun 30, 2025	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021
Earnings before interest and tax (EBIT)	US$ in thousands	1,677,570	1,317,330	1,162,280	982,795	912,351
Interest expense	US$ in thousands	4,114	45,708	47,379	22,312	23,989
Interest coverage		407.77	28.82	24.53	44.05	38.03

June 30, 2025 calculation

Interest coverage = EBIT ÷ Interest expense
= $1,677,570K ÷ $4,114K
= 407.77

The interest coverage ratios for ResMed Inc. over the specified periods demonstrate notable fluctuations, reflecting variations in the company's ability to meet interest obligations from its earnings.

As of June 30, 2021, the interest coverage ratio stood at 38.03, indicating that the company's earnings before interest and taxes (EBIT) were approximately 38 times greater than its interest expenses, suggesting a strong capacity to cover interest payments. This high ratio signifies robust financial health in terms of debt servicing capacity at that time.

By June 30, 2022, the ratio increased to 44.05, further amplifying the company's capacity to meet interest obligations. This increase implies that either EBIT improved significantly or interest expenses declined, reinforcing a solid financial cushion. The elevated ratio continues to portray resilience in the company's earnings against interest obligations.

However, a substantial decrease is observed by June 30, 2023, with the ratio declining to 24.53. Despite remaining comfortably above the critical threshold, the decrease signals a relative reduction in EBIT or a potential increase in interest expenses, which slightly diminishes the margin of safety but does not pose an immediate concern given the still-high coverage.

In the subsequent period ending June 30, 2024, the ratio modestly recovered to 28.82. This suggests some stabilization or improvement in EBIT or a reduction in interest expenses, restoring some of the earlier strength in interest coverage.

Remarkably, a dramatic increase to 407.77 is observed as of June 30, 2025. Such a spike indicates a significant change in either the company's earnings or interest expenses—most likely a substantial rise in EBIT or a decrease in interest costs—leading to an extremely high capacity to service debt. This ratio suggests exceptionally strong financial leverage in this period, although it warrants further analysis to verify the underlying causes due to its unusual magnitude.

In summary, ResMed Inc.'s interest coverage ratios have generally remained well above the typical critical threshold of 3 to 5 times, highlighting a consistent ability to meet interest obligations, albeit with notable fluctuations. The recent substantial increase indicates an especially strong position, but warrants further evaluation to understand underlying operational or financial changes influencing this metric.