Well, at least let's do some further analysis on it. Let's move on to another item, the Current Ratio . Back to this balance sheet for a moment and let's get the current assets and divide by current liabilities. If we are looking for a healthy company to do further analysis on, it better be. Interest Coverage is another measuring stick.
Most companies have some sort of debt.
Depending on just what the management's philosophy is. If they are after rapid growth, they might just borrow more money than the revenues can handle. Basically, this is why any stock goes down, inability to meet obligations. So, interest coverage has to be greater than 1.0. It is obtained by dividing operating profit by interest charges.