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S&P Global report: Companies in good shape despite rising interest rates


U.S. companies are so far unfazed by inflation and rising borrowing costs as they enter 2022 well positioned to repay their debts, according to a new analysis from S&P Global Market Intelligence. The median interest coverage ratio — a measure of a company’s ability to repay its debts calculated by dividing earnings before interest and taxes by the cost of its debt-interest payments — for nonfinancial companies rated investment-grade by S&P Global Ratings was 8.0 in the third quarter of 2021. While this was down from 8.4 in the second quarter of 2021, the ratio remains higher than the pre-pandemic level of 6.0, according to data published by S&P Global Market Intelligence. Business has benefited from cheap borrowing and a resurgence in earnings during the sharp recovery of the U.S. economy. However, that could change as inflation eats into profit margins while the cost of debt increases, the report noted.

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