For today we decided to present you with the updated analysis (FY 2020) of the interest coverage ratio of Croatian companies.
Interest coverage ratio is used as a measure which gives us an insight on the company’s ability to meet its interest payments. The ratio is calculated by dividing the company’s operating profit by the interest expenses. Therefore, a higher ratio indicates that the company is less burdened by debt and the other way around. A ratio lower than 1 indicates that the company’s operating profit is not sufficient to cover for the interest payments. We used 2020 figures for calculating the interest coverage ratio of Croatian companies.
Interest Coverage Ratio (FY 2020)
As illustrated on the graph, Ericsson NT operates with the highest interest coverage ratio of 56.9. It does not come with a surprise considering that Ericsson NT operates with low debt. To be specific, the company operates with negative net debt while its capital structure is 77.6% equity funded.
Three food companies that follow are: Podravka, Kraš and Atlantic Grupa. Podravka has an interest coverage ratio of 22.5, followed by Kraš with 19.1 and Atlantic Group with 17.2. All of these companies are also operating with very low debt.
On the flip side, three tourist companies were excluded from the calculation as they reported an operating loss. The only company to have it’s interest coverage ratio below 1 is Atlantska Plovidba. To be specific, the company operates with an interest coverage ratio of as low as 0.05 showing quite a high debt burden compared to its operating profit. We note that the company’s operating profit was significantly affected by the Covid-19 pandemic.