Viavi Solutions Inc (VIAV)

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	20,800	87,800	88,400	145,500	127,700
Interest expense	US$ in thousands	30,900	27,100	23,300	14,700	13,400
Interest coverage		0.67	3.24	3.79	9.90	9.53

June 30, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $20,800K ÷ $30,900K
= 0.67

The interest coverage ratio for Viavi Solutions Inc has shown a declining trend over the past five years. In the most recent fiscal year, as of June 30, 2024, the interest coverage ratio stood at 0.67, indicating that the company's operating income was only sufficient to cover approximately 67% of its interest expenses. This significant decrease from the previous years suggests that Viavi Solutions Inc may be facing challenges in generating enough earnings to meet its interest obligations.

Comparing to the prior years, in June 30, 2023, the interest coverage ratio was 3.24, showing a decrease from the previous year's ratio of 3.79 in June 30, 2022. The notable decline in the interest coverage ratio over these years indicates a potential deterioration in Viavi Solutions Inc's ability to make interest payments on its debt.

Furthermore, in June 30, 2021, and June 30, 2020, the interest coverage ratios were 9.90 and 9.53, respectively, reflecting a substantial drop in the most recent fiscal year. This significant decrease in the interest coverage ratio over the five-year period raises concerns about Viavi Solutions Inc's financial health and its capacity to service its debt obligations with its current level of operating income.

In conclusion, the declining trend in Viavi Solutions Inc's interest coverage ratio signals a deteriorating ability to cover interest expenses with operating income. It may indicate potential financial strain and the need for the company to address its debt levels and operational efficiency to improve its interest coverage ratio and overall financial stability.