Valero Energy Corporation (VLO)

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 4,254,000 11,958,000 15,869,000 2,146,000 -1,447,000
Interest expense US$ in thousands 556,000 592,000 562,000 603,000 563,000
Interest coverage 7.65 20.20 28.24 3.56 -2.57

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $4,254,000K ÷ $556,000K
= 7.65

Interest coverage ratio is a key financial metric that indicates a company's ability to cover its interest expenses with its operating income. It is calculated by dividing the earnings before interest and taxes (EBIT) by the interest expense.

Analyzing Valero Energy Corporation's interest coverage ratios from December 31, 2020, to December 31, 2024, reveals fluctuations in the company's ability to meet its interest obligations.

1. December 31, 2020: The interest coverage ratio was negative at -2.57, indicating that Valero Energy Corporation did not generate enough operating income to cover its interest expenses. This could raise concerns about the company's financial health and ability to service its debt.

2. December 31, 2021: The interest coverage ratio improved significantly to 3.56, suggesting that the company's operating income increased relative to its interest expenses. This may indicate a strengthening financial position.

3. December 31, 2022: The interest coverage ratio surged to 28.24, reflecting a substantial increase in the company's ability to cover its interest payments. This high ratio indicates a strong financial position and management of debt obligations.

4. December 31, 2023: The interest coverage ratio remained robust at 20.20, indicating continued strong performance in meeting interest obligations.

5. December 31, 2024: The interest coverage ratio decreased slightly to 7.65, but still indicates that Valero Energy Corporation is able to comfortably cover its interest expenses with operating income.

Overall, the trend in Valero Energy Corporation's interest coverage ratios shows improvement over the years, with a temporary dip in 2020 followed by strong performance in subsequent years. The company's ability to generate sufficient operating income to cover interest expenses is crucial for financial stability and debt management.


See also:

Valero Energy Corporation Interest Coverage