Interest Coverage Ratio: 7 Companies From Their 10-Ks
The interest coverage ratio is operating income divided by interest expense for the same year, and it shows how many times a company's operating profit could pay its interest bill. In their latest 10-Ks Microsoft covered its interest 50.88 times and Walmart 11.04 times, while Intel's operating loss put it below zero.
The interest coverage ratio is a quick test of whether a company earns enough from its operations to pay the interest on its debt. Lenders and credit analysts use it, and so do shareholders, because interest is paid before anything reaches them.
This page builds the ratio from the numbers seven companies filed with the SEC, fiscal 2016 (Walmart fiscal 2020) to the latest year, and shows what it looks like when operating income stops covering the bill.
How it works
The formula used here: interest coverage = operating income / interest expense. Operating income is profit from the business before interest and tax, the figure also called EBIT in many textbooks. Interest expense is the interest the company owes on its borrowing for the same year. The operating income page covers what sits above that line.
Reading the result. A ratio of 10 means operating profit was ten times the interest bill. A ratio of 1 means it only just paid it. Below 1, the company needed cash from somewhere else, such as savings, asset sales or new borrowing, to pay interest. A negative ratio means the business made an operating loss.
Why it is watched. Interest must be paid whatever the year looks like, and missing it can put a company in default. That makes coverage one of the checks behind credit risk and a close relative of the debt service ratio, which adds principal repayments.
Variants. Some analysts use EBITDA on top instead of operating income, which gives a higher ratio because depreciation is added back. Others use cash interest paid on the bottom. This page uses operating income and reported interest expense throughout, so the seven companies are compared on one rule.
A worked example
Walmart, fiscal 2026 (the year to 31 Jan 2026), from its 10-K data:
- Operating income: $29,825 million.
- Interest expense: $2,318 million on debt plus $383 million on finance leases = $2,701 million. Walmart reports these as two lines, and both are interest it owes.
- Coverage: $29,825 / $2,701 = 11.04. Operating profit covered the year’s interest 11.04 times.
Carnival, fiscal 2023 (the year to 30 Nov 2023): operating income $1,956 million / interest expense $2,066 million = 0.95. The business earned a profit, but not enough to pay the interest on its own.
The original data
Seven companies, fiscal 2016 to each company’s latest 10-K (Walmart from fiscal 2020, the first year it reports finance-lease interest), from the SEC’s XBRL company facts. Only full-year 10-K figures are used; where a later filing restated a year, the newest filing wins.
| company | latest fiscal year | operating income | interest expense | coverage |
|---|---|---|---|---|
| Microsoft | 2026 (to 30 Jun) | $155,237 million | $3,051 million | 50.88x |
| Apple | 2023 (to 30 Sep) | $114,301 million | $3,933 million | 29.06x |
| Walmart | 2026 (to 31 Jan) | $29,825 million | $2,701 million | 11.04x |
| AT&T | 2025 | $24,162 million | $6,804 million | 3.55x |
| Carnival | 2025 (to 30 Nov) | $4,483 million | $1,349 million | 3.32x |
| Boeing | 2025 | $4,281 million | $2,771 million | 1.54x |
| Intel | 2025 | -$2,214 million | $1,091 million | -2.03x |
Across all 66 company-years, 14 were below 1.0, and 12 of those were operating losses: Boeing in every year from 2019 to 2024, Carnival from 2020 to 2022, Intel in 2024 and 2025, and AT&T in 2022. The two positive ones were Carnival in 2023 at 0.95x and Intel in 2023 at 0.11x.
Every company-year, with the tag each interest figure came from, is in the interest coverage file.
Operating losses: Boeing, Carnival and Intel
Boeing went from 28.73x in 2017 to six straight years below zero. Its operating income was -$1,975 million in 2019 against $722 million of interest, and -$10,707 million in 2024 against $2,725 million. In 2025 it was back above 1, at 1.54x, with the interest bill almost four times its 2019 size.
Carnival’s ratio fell because both sides moved. Operating income went from $3,276 million in fiscal 2019 to -$8,865 million in fiscal 2020, a coverage of -9.91x, and the interest bill rose from $206 million to $895 million, then to $1,601 million in 2021 and $2,066 million in 2023. By fiscal 2025 interest was down to $1,349 million and coverage back to 3.32x.
Intel’s slide was gradual, then sudden. Coverage was 49.82x in 2018 and 4.71x in 2022; in 2023 operating income of $93 million barely registered against $878 million of interest, and 2024 brought an operating loss of $11,678 million, -11.29x.
When it fails
It uses one year of profit. A single bad year, such as AT&T’s operating loss in 2022, drops the ratio below zero even though the company covered interest 3.86 times the year before and 3.50 times the year after.
It depends on which interest line is used. Delta Air Lines is left out of this page because after fiscal 2017 its filings tag interest only net of interest income, apart from lease interest, and a net figure makes the ratio look better whenever a company earns interest on its cash. Walmart’s debt line alone would give 12.87x instead of 11.04x. Apple’s data carry a separate interest-expense figure only through fiscal 2023, two years behind its latest 10-K.
It is not cash. Operating income includes non-cash charges and gains, and interest can be paid out of savings or new borrowing for a while. A company can sit below 1.0 for years, as Boeing did, and keep paying. The cash flow to debt ratio looks at the cash side.
It says nothing about when debt comes due. A company with high coverage can still face a large repayment it has to refinance, and the ratio does not show the rate it will pay then.
Related
The debt service ratio adds principal to the same test, and the cash flow to debt ratio swaps profit for cash. Credit risk covers why lenders care about both, and the debt-to-equity ratio shows how much of a company is funded with borrowing in the first place.
Look at the interest line before the ratio. Check whether the figure is gross or net of interest income and whether lease interest is in it, because the same company can show a very different coverage depending on which line is used.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.