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Listed Companies’ Interest Coverage Ratio on the Decline
35% of Listed Firms Have Interest Coverage Ratio Below 1
Listed Companies’ Interest Coverage Ratio on the Decline
  • By Jung Min-hee
  • April 9, 2020, 10:59
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The number of listed companies with an interest coverage ratio of less than 1 increased sharply in 2019.

Financial data provider FnGuide looked into 1,792 KOSPI- and KOSDAQ-listed companies’ data for the period of 2016 to 2019 and said on April 8 that 619 companies posted an interest coverage ratio of less than 1 in 2019. For reference, the number was 535 in 2018, 464 in 2017, and 421 in 2016.

The 619 companies include 56 biotech and pharmaceutical companies, 50 auto parts manufacturers and 36 companies manufacturing displays and related components.

The overall decline in those listed companies’ interest coverage capabilities is because their income derived from sales activities decreased last year. Specifically, the listed companies’ operating cash flow fell from 203.23 trillion won to 180.93 trillion won in 2019.

Although the companies are continuing to increase their cash to prepare for a recession, their capabilities against the liquidity crisis triggered by the COVID-19 pandemic are insufficient. Their cash and cash equivalents increased from 167.8 trillion won to 187.7 trillion won from 2016 to 2019. However, the number of those with a current ratio of less than 100 percent rose from 403 to 414 last year, which means the 414 companies are unlikely to be able to repay their debts maturing within one year even if they mobilize all of their assets that can be turned into cash within one year.