|
|
| Average
Interest Rate |
= |
(Interest
Expense - Accounts Payable) |
|
Liabilities |
|
Indicates
the average interest rate that a company borrows at.
Things
to remember |
- This is a rough estimate, the ratio does not account for
everything.
- Using
the before tax or after tax interest expense will produce
different results.
|
[Click
on the image(s) above to see the financial statements] |
Interest
Rate Analysis:
There are several versions of this ratio, some people prefer to
just use interest bearing liabilities such as the bonds and other short term loans. This formula won't give you the exact
interest rate they are paying, but it is useful in an interest rate
sensitive environment. And if you compare it to previous years then
you are able to tell what rate the company had to take on more debt
at. If you will notice from the balance sheet above, Cory's Tequila
Co. doesn't have any long term debt - therefore you will not find
an interest expense. What a great position to be in, practically
debt free.
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