Rush Enterprises A Inc (RUSHA)

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	469,022	514,749	528,387	316,110	161,450
Interest expense	US$ in thousands	72,024	53,694	19,763	2,427	9,727
Interest coverage		6.51	9.59	26.74	130.25	16.60

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $469,022K ÷ $72,024K
= 6.51

Interest coverage is a key financial ratio that indicates a company's ability to meet its interest obligations on outstanding debt. It is calculated by dividing earnings before interest and taxes (EBIT) by the company's interest expenses. In the case of Rush Enterprises A Inc, the interest coverage ratio has shown some fluctuations over the past five years.

As of December 31, 2020, Rush Enterprises A Inc had an interest coverage ratio of 16.60, indicating that the company generated 16.60 times the amount of earnings needed to cover its interest expenses. This suggests a relatively healthy financial position and the ability to comfortably meet its interest payments.

By December 31, 2021, the interest coverage ratio significantly improved to 130.25, reflecting a substantial increase in earnings relative to interest expenses. This sharp improvement indicates a strong financial performance and a reduced risk of default on debt obligations.

In the following years, the interest coverage ratio showed some fluctuations, with ratios of 26.74 on December 31, 2022, 9.59 on December 31, 2023, and 6.51 on December 31, 2024. These lower ratios suggest that Rush Enterprises A Inc may have experienced challenges in generating sufficient earnings to cover its interest expenses during those periods.

Overall, a high interest coverage ratio indicates a lower risk of financial distress, while a declining ratio may signal potential financial difficulties. It is essential for investors and analysts to closely monitor changes in the interest coverage ratio to assess the company's financial health and ability to manage its debt obligations effectively.