ResMed Inc (RMD)

Interest coverage

		Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	1,317,330	1,162,280	982,795	912,351	809,659
Interest expense	US$ in thousands	45,708	47,379	22,312	23,989	40,377
Interest coverage		28.82	24.53	44.05	38.03	20.05

June 30, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $1,317,330K ÷ $45,708K
= 28.82

The interest coverage ratio measures a company's ability to pay interest expenses on its debt with its operating income. A higher interest coverage ratio indicates that the company is more capable of meeting its interest obligations.

Analyzing ResMed Inc's interest coverage over the past five years, we observe a fluctuating trend. In 2022, the interest coverage ratio was the highest at 44.83, indicating a strong ability to cover interest expenses. This was followed by a slight decrease in 2023 to 23.89, suggesting a dip in the company's ability to cover interest costs.

However, in the subsequent years, we see an improvement in ResMed's interest coverage ratio. In 2024, the ratio increased significantly to 28.88, reflecting a stronger capacity to meet interest obligations compared to the previous year. Furthermore, in 2021 and 2020, the interest coverage ratios of 37.84 and 19.16, respectively, show varying levels of the company's ability to cover interest expenses during those years.

Overall, ResMed Inc has shown fluctuating but generally healthy interest coverage ratios over the past five years, with some years demonstrating stronger capacity to cover interest expenses than others. It is important for stakeholders to monitor this ratio to assess the company's financial health and ability to service its debt obligations.