On the issue of a negative interest coverage multiple

The losses are severe, and the degree of guarantee for the repayment of debts due is weak.

Of course, this may be better if it is a case-by-case analysis.

However, when I asked the teacher, he said that a negative number indicates a strong ability to pay debts, so how should I analyze it?

1) The above is negative (generally the interest expense is positive), which means that the company has lost money.

2) The following is negative (interest income is greater than interest expense, generally not much) That's the kind of situation you always say.

3) My word, I don't believe the teacher.

Interest Protection Ratio (Total Profit + Interest Expense) Interest expense.

Interest protection multiplier EBIT interest.

In the formula: numerator: "total profit + interest expense" equals EBIT ebit = "net profit + interest expense + income tax".

Denominator: "Interest expense" refers to all interest payable in the current period, including interest expense in financial expenses, and capitalized interest included in the cost of fixed assets. Capitalized interest, although not deducted from the income statement, is still to be repaid.

Embodiment. The interest coverage ratio indicator reflects the number of times the operating income of the enterprise is the interest paid on the debt. As long as the interest protection multiple is large enough, the enterprise has sufficient ability to pay the interest, and vice versa.

The focus of the interest protection multiple is to measure the ability of a company to pay interest, and without a sufficiently large EBIT, interest payment will be difficult.

The interest guarantee ratio not only reflects the size of the enterprise's profitability, but also reflects the degree of guarantee of profitability to repay the due debts, which is not only the premise basis for the enterprise's debt operation, but also an important indicator to measure the long-term solvency of the enterprise. In order to maintain normal solvency, the interest protection ratio should be at least greater than 1, and the higher the ratio, the stronger the long-term solvency of the enterprise. If the interest coverage ratio is too low, the enterprise will face the risk of loss and debt repayment security and stability.

A negative denominator indicates that there is income from financial expenses is a good thing.

The formula for calculating the interest protection ratio is as follows: interest protection ratio = EBIT interest expense.

In the formula: EBIT = total profit + financial expenses, EBIT = net sales - operating expenses; Earnings before interest and taxes (EBIT) = total sales revenue - total variable costs - fixed operating costs.

The interest coverage ratio, also known as the interest coverage ratio, is the ratio of the EBIT to the interest expense obtained by the production and operation of the enterprise.

It is a measure of a company's long-term solvency. The larger the interest protection multiple, the stronger the company's ability to pay interest expenses.

Summary. Hello dear! The decrease in the interest protection ratio indicates that the interest protection ratio refers to the degree of protection of the enterprise's interest payment ability relative to the debt within a certain period of time.

If the interest coverage ratio is reduced, it means that the company's profit or cash flow is not enough to cover the interest payment on the debt. This may be due to poor business management, intensified market competition, costs, financial pressure, etc. This situation can lead to the inability of the business to pay the interest on the debt on time, increasing the financial risk and credit risk.

Hello dear! The decrease in the interest protection ratio indicates that the interest protection ratio refers to the degree of the enterprise's interest payment ability relative to the debt guarantee process within a certain period of time. If the interest coverage ratio is reduced, it means that the company's profit or cash flow is not enough to cover the interest payment on the debt.

This may be due to poor business management, intensified market competition, cost, capital bending and other reasons. This situation may lead to the inability of the enterprise to pay the interest on the debt on time, increasing the financial risk and credit risk.

The reason for the decline in the interest protection ratio of Bloomage Biotech from 2020 to 2021.

Hello dear! The reasons for the decline in the interest protection ratio of Bloomage Biotech may be as follows:1

Decline in the company's financial condition: Due to various factors, the company's operating income, profit and other financial indicators have declined, and the financial situation has deteriorated, resulting in a decrease in the interest protection ratio. 2.

Increase in borrowing amount: If the company borrows new but does not increase its operating income accordingly, the interest burden will increase and sell, resulting in a decrease in the interest coverage ratio. 3.

Expenses: If the company's various expenses, such as management expenses, sales expenses, R&D expenses, etc., increase, then the interest protection ratio will also decrease. 4.

Rising interest rates: If a company's borrowing rate rises, then the interest expense will also increase, resulting in a decrease in the interest coverage multiple. It should be noted that only by paying attention to the changes in the company's financial indicators can we truly understand the reasons for the decline in the interest coverage ratio and judge the company's solvency.

The interest Zhengshan guarantee multiple is an indicator to measure the solvency of an enterprise, which refers to the number of times that the current operating profit of the enterprise can cover the interest paid. If the interest coverage ratio is negative, it means that the enterprise cannot cover the interest payment expenses with current profits, indicating that the company's solvency is poor.

To improve the situation, you can start with the following:

1.Optimize the business model of the enterprise and improve the profitability of the enterprise. By improving production efficiency, strengthening marketing, controlling costs and other means, we can improve the operating efficiency and profit level of enterprises, so as to increase the interest protection multiple.

2.Strengthen asset and liability management, optimize asset structure and sales. By rationally arranging the inflow and outflow of funds, adjusting the asset allocation, reducing the capital occupied by liabilities, optimizing the asset structure, and improving the return on assets, the interest protection ratio is increased.

3.Increase debt maturity and reduce debt risk. Through the issuance of bonds to long-term creditors, the debt maturity is extended, the debt risk of enterprises is reduced, the short-term debt repayment pressure is reduced, and the interest protection ratio is increased.

4.Appropriately reduce dividends and give priority to debt repayment. By reducing shareholder dividends and other means, priority is given to debt repayment, reducing the pressure of corporate debt, and increasing the interest protection ratio.

In short, increasing the interest guarantee ratio requires a variety of measures to be taken from multiple aspects in order to effectively improve the solvency of enterprises.

Yes, normal. The company will have negative financial expenses, indicating that the interest income on deposits is higher than the interest expense on loans, and the interest protection ratio in this case is negative, which is a sign of strong solvency.

If the enterprise does not have a loan, it will not incur interest expenses, and there will be no interest protection multiple. The financial cost is negative, and in general, it is likely that the enterprise does not have a loan.

Interest coverage ratio = EBIT Interest expense.

EBIT = Gross Profit + Interest Expense.

Therefore, a negative financial expense does not mean that the interest expense is also negative, and the interest expense is mainly separated from the financial expense and calculated by the formula.

If the interest coverage multiple is negative, the interest expense is negative, i.e., interest income is higher than interest expense. That is, the income generated by the enterprise from bank deposits, investment in bonds or other fixed-income investment and wealth management methods is higher than the interest paid by the enterprise due to debt financing in the form of bank loans or bond issuance.