Name: Interest Coverage

Definition: Interest coverage tells you how easily the company can pay interest on its debt using operating profits. It’s like asking: “Can the company comfortably make its loan payments, or is it barely scraping by?” The higher the ratio, the safer. A very low ratio means debt payments may strain the business, especially if profits drop.

Interpretation:
• In '2021', PEP's interest coverage was 6.27, indicating the firm's ability to meet its interest obligations. Industry average for Beverages (Production/Distribution) in '2021' stood at 5.12.
• In '2022', PEP's interest coverage was 12.40, indicating the firm's ability to meet its interest obligations. The increase since '2021' reflects strengthening financial performance. Industry average for Beverages (Production/Distribution) in '2022' stood at 1.76. Industry average declined by 3.36 from previous year.
• In '2023', PEP's interest coverage was 14.94, indicating the firm's ability to meet its interest obligations. The increase since '2022' reflects strengthening financial performance. Industry average for Beverages (Production/Distribution) in '2023' stood at 1.69. Industry average declined by 0.07 from previous year.
• In '2024', PEP's interest coverage was 14.00, indicating the firm's ability to meet its interest obligations. The decline from '2023' may indicate some operational or financial challenges. Industry average for Beverages (Production/Distribution) in '2024' stood at 4.14. Industry average increased by 2.45 compared to previous year.
Overall, PEP's interest coverage has been volatile but showed an upward trend over the past 4 years.

Formula: Interest Coverage = EBIT / Interest Expense

Good Range: Minimum 3-5 desirable; below 1 is risky.