Alcoa (FRA:ALU2) Interest Coverage : 2.76 (As of Sep. 2016)

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What is Alcoa Interest Coverage?

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company's Operating Income by its Interest Expense. Alcoa's Operating Income for the three months ended in Sep. 2016 was €327 Mil. Alcoa's Interest Expense for the three months ended in Sep. 2016 was €-119 Mil. Alcoa's interest coverage for the quarter that ended in Sep. 2016 was 2.76. The higher the ratio, the stronger the company's financial strength is.

The historical rank and industry rank for Alcoa's Interest Coverage or its related term are showing as below:

FRA:ALU2's Interest Coverage is not ranked ^*
in the Metals & Mining industry.
Industry Median: No Debt
* Ranked among companies with meaningful Interest Coverage only.

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

Alcoa Interest Coverage Historical Data

The historical data trend for Alcoa's Interest Coverage can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

Note: For Interest Coverage, "No debt" indicates no long-term debt. An indication of "No Debt" does not necessarily mean that the company has no long-term debt obligations; it could be due to missing data in the quarterly or annual report. Use caution when interpreting this information.

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Alcoa Interest Coverage Chart

Alcoa Annual Data

Trend

Dec06

Dec07

Dec08

Dec09

Dec10

Dec11

Dec12

Dec13

Dec14

Dec15

Interest Coverage

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2.86

0.97

2.15

1.50

Alcoa Quarterly Data
	Dec11	Mar12	Jun12	Sep12	Dec12	Mar13	Jun13	Sep13	Dec13	Mar14	Jun14	Sep14	Dec14	Mar15	Jun15	Sep15	Dec15	Mar16	Jun16	Sep16
Interest Coverage	Get a 7-Day Free Trial															3.09	-	1.59	3.27	2.76

Competitive Comparison of Alcoa's Interest Coverage

For the Aluminum subindustry, Alcoa's Interest Coverage, along with its competitors' market caps and Interest Coverage data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

Alcoa's Interest Coverage Distribution in the Metals & Mining Industry

For the Metals & Mining industry and Basic Materials sector, Alcoa's Interest Coverage distribution charts can be found below:

* The bar in red indicates where Alcoa's Interest Coverage falls into.

Alcoa Interest Coverage Calculation

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company's Operating Income (EBIT) by its Interest Expense:

If Interest Expense is negative and Operating Income is positive, then

Interest Coverage

-1

Operating Income

Interest Expense

Else if Interest Expense is negative and Operating Income is negative, then

The company did not have earnings to cover the interest expense.

Else if Interest Expense is 0 and Long-Term Debt & Capital Lease Obligation is 0, then

The company had no debt ⁽¹⁾.

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

Alcoa's Interest Coverage for the fiscal year that ended in Dec. 2015 is calculated as

Here, for the fiscal year that ended in Dec. 2015, Alcoa's Interest Expense was €-457 Mil. Its Operating Income was €687 Mil. And its Long-Term Debt & Capital Lease Obligation was €8,302 Mil.

Interest Coverage	=	-1	*	Operating Income (A: Dec. 2015 )	/	Interest Expense (A: Dec. 2015 )
	=	-1	*	686.664	/	-457.164
	=	1.50

Alcoa's Interest Coverage for the quarter that ended in Sep. 2016 is calculated as

Here, for the three months ended in Sep. 2016, Alcoa's Interest Expense was €-119 Mil. Its Operating Income was €327 Mil. And its Long-Term Debt & Capital Lease Obligation was €8,465 Mil.

Interest Coverage	=	-1	*	Operating Income (Q: Sep. 2016 )	/	Interest Expense (Q: Sep. 2016 )
	=	-1	*	326.997	/	-118.503
	=	2.76

The higher the ratio, the stronger the company's Financial Strength is.

Alcoa (FRA:ALU2) Interest Coverage Explanation

Ben Graham requires that a company has a minimum interest coverage of 5 with the companies he invested. If the interest coverage is less than 2, the company is burdened by debt. Any business slow or recession may drag the company into a situation where it cannot pay the interest on its debt.

Interest Coverage is an important factor when GuruFocus ranks a company's overage Financial Strength .

Alcoa Interest Coverage Related Terms

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Alcoa (FRA:ALU2) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Basic Materials » Metals & Mining » Alcoa Inc (FRA:ALU2) » Definitions » Interest Coverage

Comparable Companies

Traded in Other Exchanges

N/A

Address

Website

https://www.arconic.com

Arconic Inc, formerly known as Alcoa Inc was first incorporated as the Pittsburgh Reduction Company on October 1, 1888. The Company is engaged in manufacturing and engineering lightweight metals. Its products include aluminum, titanium, and nickel, used in aerospace, automotive, commercial transportation, packaging, building and construction, oil and gas, defense, consumer electronics, and industrial applications. The Company is also engaged in the production and management of aluminum, fabricated aluminum, and alumina combined, through its active participation in all aspects of the industry: technology, mining, refining, smelting, fabricating, and recycling. It has investments and operating activities in, among others, Australia, Brazil, China, Guinea, Iceland, Russia, and Saudi Arabia. The Company operates in segments including Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions. The Company's Global Rolled Products segment represents its midstream operations. The Engineered Products and Solutions segment represents a portion of the Company's downstream operations. Its downstream portfolio includes two segments Engineered Products and Solutions and Transportation and Construction Solutions. The Engineered Products and Solutions consist of Alcoa Titanium & Engineered Products; Alcoa Fastening Systems & Rings; Alcoa Forgings and Extrusions; and Alcoa Power and Propulsion. The Company's Transportation and Construction Solutions segment represents a portion of its downstream operations. The raw materials used includes bauxite, alloying materials, caustic soda, alumina, electricity, aluminum fluoride, fuel oil, calcined petroleum coke, lime (CaO), cathode blocks, natural gas, electricity, liquid pitch, natural gas, titanium alloys, titanium sponge and resin. The Company's trademark products include Howmet metal castings, Huck fasteners, Kawneer building panels and Dura-Bright wheels with easy-clean surface treatments.

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