Tapestry Inc (TPR)
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 | 1,140,100 | 1,172,400 | 1,175,800 | 968,000 | -550,800 |
| Interest expense | US$ in thousands | 369,600 | 73,100 | 69,300 | 74,100 | 72,100 |
| Interest coverage | 3.08 | 16.04 | 16.97 | 13.06 | -7.64 |
June 30, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $1,140,100K ÷ $369,600K
= 3.08
Interest coverage is a key financial ratio that indicates a company's ability to meet its interest obligations from its operating income. A higher interest coverage ratio is generally preferable as it suggests a company is more capable of servicing its debt.
In the case of Tapestry Inc, we observe fluctuations in the interest coverage ratio over the past five years. The ratio was relatively stable and healthy in 2020, 2021, and 2022 at 13.06, 16.97, and 16.04 respectively, indicating the company's strong ability to cover its interest payments with operating income.
However, in 2023 and 2024, the interest coverage ratio decreased significantly to 3.08, which may indicate a potential strain on Tapestry's ability to cover its interest expenses with its operating income. This decline in the ratio could be a cause for concern for creditors and investors as it may indicate increased financial risk for the company.
Overall, while Tapestry Inc had strong interest coverage ratios in the past, the recent decline raises questions about its current financial health and its ability to handle its debt obligations effectively. Further analysis of the company's financial performance and future prospects would be necessary to understand the implications of this trend.
Peer comparison
Jun 30, 2024