Walgreens Boots Alliance Inc (WBA)
Interest coverage
| Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | Aug 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | -4,358,000 | 4,707,000 | 4,114,000 | 1,408,000 | 5,209,000 |
| Interest expense | US$ in thousands | 580,000 | 400,000 | 905,000 | 613,000 | 650,000 |
| Interest coverage | -7.51 | 11.77 | 4.55 | 2.30 | 8.01 |
August 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $-4,358,000K ÷ $580,000K
= -7.51
The interest coverage ratio measures a company's ability to meet its interest obligations with its earnings before interest and taxes (EBIT). A higher ratio indicates a better ability to cover interest payments.
Looking at the trend for Walgreens Boots Alliance Inc's interest coverage ratio over the past five years, we observe a significant decline. The ratio decreased from 7.13 in 2019 to -11.81 in 2023. This substantial decrease suggests that the company's ability to cover its interest expenses with its EBIT has deteriorated significantly.
While the ratio was positive and relatively healthy in the earlier years, it turned negative in 2023, indicating that the company's EBIT is not sufficient to cover its interest obligations. This may raise concerns about the company's financial health and its ability to service its debt in the long term.
The sharp decrease in the interest coverage ratio should be carefully considered by investors and stakeholders, as it may indicate the need for the company to address its financial structure and operating performance to improve its ability to meet interest payments.
Peer comparison
Aug 31, 2023