Walgreens Boots Alliance Inc (WBA)
Interest coverage
| Aug 31, 2024 | Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | -6,908,000 | -4,358,000 | 4,707,000 | 4,114,000 | 1,408,000 |
| Interest expense | US$ in thousands | 482,000 | 580,000 | 400,000 | 905,000 | 613,000 |
| Interest coverage | -14.33 | -7.51 | 11.77 | 4.55 | 2.30 |
August 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $-6,908,000K ÷ $482,000K
= -14.33
The interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. A higher ratio indicates a stronger ability to cover interest expenses. Looking at the trend in Walgreens Boots Alliance Inc's interest coverage ratio from 2020 to 2024, we observe a fluctuating pattern, indicating varying levels of financial strength regarding interest payment obligations.
In 2020, the interest coverage ratio was 2.30, suggesting that the company's operating income was 2.3 times its interest expense. This indicated a moderate ability to cover interest payments. Over the next few years, the interest coverage ratio deteriorated significantly. By 2023 and 2024, the interest coverage ratios were negative (i.e., -7.51 and -14.33, respectively), which is a concerning trend. A negative interest coverage ratio signifies that the company's operating income was insufficient to cover its interest expenses, potentially raising solvency issues and the risk of defaulting on debt obligations.
The sharp decline in the interest coverage ratio from a positive figure in 2020 to negative values in the subsequent years indicates a significant deterioration in the company's financial health and its ability to service its debt. This trend suggests that Walgreens Boots Alliance Inc may be experiencing financial distress and challenges in meeting its interest payment obligations. Further analysis and investigation into the company's financial performance and debt management are warranted to address these concerning developments and mitigate potential risks associated with its debt levels.
Peer comparison
Aug 31, 2024