Timken Company (TKR)
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 | 611,100 | 657,100 | 658,600 | 535,400 | 463,900 |
| Interest expense | US$ in thousands | 125,100 | 101,400 | 70,800 | 56,500 | 63,900 |
| Interest coverage | 4.88 | 6.48 | 9.30 | 9.48 | 7.26 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $611,100K ÷ $125,100K
= 4.88
The interest coverage ratio measures a company's ability to cover its interest expense with its operating income. In the case of Timken Company, the trend in interest coverage from 2020 to 2024 shows fluctuations.
In 2020, the interest coverage was 7.26, indicating that Timken's operating income was able to cover its interest expense 7.26 times. This ratio improved in 2021 to 9.48, reflecting a stronger ability to cover interest payments.
However, in 2022 and 2023, the interest coverage ratio slightly decreased to 9.30 and 6.48, respectively. This indicates that Timken's operating income might have been less effective in covering its interest expense during these years.
By the end of 2024, the interest coverage ratio further declined to 4.88, suggesting a potential strain on the company's ability to cover its interest obligations with its operating income. It is important for investors and stakeholders to monitor this ratio closely, as a declining trend in interest coverage could indicate potential financial risks for the company.
Peer comparison
Dec 31, 2024