Advanced Search

Activity 24 : Vodafone Interest cover

Calculate the interest cover ratios for Vodafone for the two years for which the data in the database are available. Explain your findings.

Here are the templates to help you on your way.

Did you get this?

These results follow on from all other poor results for Vodafone, except the P/E ratio, of course. Although the results are positive, they are terrible. Why? Well, the values are positive because both the profit and the interest are negative amounts and as any good mathematician knows, two negatives make a positive!

Consequently, Vodafone's interest cover ratio tells us that its profits are insufficient to pay the interest it owes.

However, these results help us to illustrate a good point: even though the interest cover ratio gives us a bad result, it doesn't mean the Vodafone can't pay the interest it owes: in fact it must have because its still in business and its creditors have yet to take it to court for recovery of its debt.

You can now try these additional questions.

Section Index | Previous | Next | Next Section | Section Map