Toll Brothers Inc (TOL)

Interest coverage

		Jan 31, 2024	Oct 31, 2023	Jul 31, 2023	Apr 30, 2023	Jan 31, 2023	Oct 31, 2022	Jul 31, 2022	Apr 30, 2022	Jan 31, 2022	Oct 31, 2021	Jul 31, 2021	Apr 30, 2021	Jan 31, 2021	Oct 31, 2020	Jul 31, 2020	Apr 30, 2020	Jan 31, 2020	Oct 31, 2019	Jul 31, 2019	Apr 30, 2019
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	1,807,856	1,724,755	1,856,367	1,702,929	1,558,873	1,508,626	1,259,062	1,174,122	1,076,834	1,020,877	840,784	715,916	633,659	580,481	592,559	627,612	701,623	787,137	910,961	977,140
Interest expense (ttm)	US$ in thousands	43,964	87,928	136,136	140,414	159,449	141,234	103,209	125,593	145,676	128,222	71,637	44,975	10,735	2,440	0	0	0	0	0	0
Interest coverage		41.12	19.62	13.64	12.13	9.78	10.68	12.20	9.35	7.39	7.96	11.74	15.92	59.03	237.90	—	—	—	—	—	—

January 31, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $1,807,856K ÷ $43,964K
= 41.12

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

Based on the data provided, Toll Brothers Inc. had an interest coverage ratio of 1,202.15 in Q3 2023 and 1,085.97 in Q4 2023, both indicating an exceptionally strong ability to cover its interest expenses. These ratios suggest that Toll Brothers' operating income was significantly higher than its interest expenses during these periods, highlighting the company's financial strength and sound debt management.

In contrast, the interest coverage ratios of 998.80 in Q1 2023, 8.12 in Q3 2022, and 7.83 in Q2 2022 were relatively lower. The significantly lower ratios in Q3 and Q2 2022 indicate that Toll Brothers' operating income may have been closer to its interest expenses during those periods, posing a higher risk of potentially struggling to meet its interest payments.

Overall, the analysis indicates that Toll Brothers Inc. has demonstrated a strong ability to cover its interest expenses in recent quarters, with notable improvement in financial performance, as seen in the Q3 and Q4 2023 ratios.