Bonso Electrs Intl (BNSOF) Financials
A multiple compares the market's price with a filed figure; it says what the market pays, not how the business is doing. The market capitalization is the vendor's as of Nov 2, 2026; every other figure is from the SEC filings on this page. Not financial advice.
Newest figures come from the filing for FY2022, filed Aug 15, 2022. Each column of the statement tables below links to the filing it was taken from.
Bonso Electrs Intl Inc (BNSOF) reported $14.8M in revenue for fiscal year 2022, down 5.1% from the prior fiscal year. This page shows its income statement, balance sheet, cash flow statement, and key financial ratios. View 13 years of annual fundamentals and quarterly data, with year-over-year growth rates and compound annual growth rates (CAGR). All figures are derived from SEC filings.
Bonso’s 2022 reversal came from sharply higher product costs and inventory, turning a previously profitable, cash-generating operation into one consuming cash.
The deterioration was a cost-and-working-capital squeeze, not simply weaker demand: revenue fell5.1% while cost of revenue rose29.3% and inventory increased93.9% . That combination compressed gross margin by13.8 percentage points and helps explain why operating cash flow swung from$1.984M in FY2021 to-$1.982M in FY2022.
The business had meaningful operating leverage in FY2021, when net income reached
Cash conversion weakened sharply alongside profitability: free cash flow moved from
Financial Health Signals
We do not publish a peer-relative financial health score for Bonso Electrs Intl Inc, because the score only covers companies whose filings and listing give us what it needs to compare them with their peers. The signals and metrics below are current.
Bonso Electrs Intl Inc scores 0.83, below the 1.81 distress threshold. The score is pulled down most by an accumulated deficit of $7.1M against total assets of $23.8M. This indicates elevated financial distress risk and warrants close attention to liquidity and debt levels.
Distress-screening estimate for non-financial companies. Not computed for banks or insurers, where the Altman model does not apply.
Bonso Electrs Intl Inc passes 4 of 9 financial strength tests. 1 of 4 profitability signals pass, 2 of 3 leverage/liquidity signals pass, 1 of 2 operating efficiency signals passes.
Bonso Electrs Intl Inc reported a net loss of $2.8M while operations used $2.0M of cash. With neither figure positive, the ratio between the two carries no quality signal.
Bonso Electrs Intl Inc reported an operating loss of $2.2M against $118K in interest expense. There is no operating profit to cover interest, so interest must be met from cash reserves or from financing rather than from operations.
Key Financial Metrics
Earnings & Revenue
Bonso Electrs Intl Inc generated $14.8M in revenue in fiscal year 2022. This represents a decrease of 5.1% from the prior year.
Bonso Electrs Intl Inc's EBITDA was -$1.9M in fiscal year 2022, measuring earnings before interest, taxes, depreciation, and amortization. This represents a decrease of 231.1% from the prior year.
Bonso Electrs Intl Inc reported a net loss of $2.8M in fiscal year 2022. This represents a decrease of 255.8% from the prior year.
Bonso Electrs Intl Inc earned -$0.57 per diluted share (EPS) in fiscal year 2022. This represents a decrease of 267.6% from the prior year.
Cash & Balance Sheet
Bonso Electrs Intl Inc recorded an outflow of $3.2M in free cash flow in fiscal year 2022, representing a cash shortfall after capex. This represents a decrease of 348.2% from the prior year.
Bonso Electrs Intl Inc held $6.7M in cash against $2.9M in long-term debt as of fiscal year 2022.
Not reported for fiscal year 2022.
Margins & Returns
Bonso Electrs Intl Inc's gross margin was 48.1% in fiscal year 2022, indicating the percentage of revenue retained after direct costs. This is down 13.8 percentage points from the prior year.
Bonso Electrs Intl Inc's operating margin was -15.0% in fiscal year 2022, reflecting core business profitability. This is down 22.7 percentage points from the prior year.
Bonso Electrs Intl Inc's net profit margin was -18.6% in fiscal year 2022, showing the share of revenue converted to profit. This is down 30.0 percentage points from the prior year.
Bonso Electrs Intl Inc's ROE was -18.0% in fiscal year 2022, measuring profit generated per dollar of shareholder equity. This is down 28.2 percentage points from the prior year.
Capital Allocation
Bonso Electrs Intl Inc invested $237K in research and development in fiscal year 2022. This represents an increase of 3.5% from the prior year.
Bonso Electrs Intl Inc invested $1.2M in capex in fiscal year 2022, funding long-term assets and infrastructure. This represents an increase of 72.1% from the prior year.
Not reported for fiscal year 2022.
BNSOF Income Statement
Figures in USD, abbreviated K (thousand), M (million), B (billion), T (trillion). Negative values carry a minus sign and red type. Each change compares the year with the year before it, and each quarter with the same quarter a year earlier.
| Metric | FY22Filing | FY21Filing | FY20Filing | FY19Filing | FY18Filing | FY17Filing | FY15Filing | FY14Filing | FY13Filing | FY12Filing | FY11Filing | FY11Filing | FY10Filing |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | $14.8M-5.1% | $15.6M+19.0% | $13.1M+31.1% | $10.0M-13.3% | $11.5M-39.2% | $19.0M | $28.9M-7.5% | $31.3M+3.0% | $30.4M+13.9% | $26.7M-6.0% | $28.4M | $28.4M-0.5% | $28.5M |
| Cost of Revenue | $7.7M+29.3% | $5.9M+4.4% | $5.7M-5.7% | $6.0M-13.3% | $7.0M-38.3% | $11.3M | $23.1M-19.3% | $28.6M+13.3% | $25.3M+10.9% | $22.8M-8.0% | $24.8M | $24.8M+4.5% | $23.7M |
| Gross Profit | $7.1M-26.2% | $9.7M+30.3% | $7.4M+87.2% | $4.0M-13.3% | $4.6M-40.5% | $7.7M | $5.9M+118.8% | $2.7M-47.8% | $5.1M+31.4% | $3.9M+7.5% | $3.6M | $3.6M-25.2% | $4.8M |
| R&D Expenses | $237K+3.5% | $229K+7.5% | $213K+21.7% | $175K+15.1% | $152K-3.8% | $158K | $228K-37.7% | $366K-7.6% | $396K+26.9% | $312K-6.6% | $334K | $334K-42.4% | $580K |
| SG&A Expenses | $9.5M+6.8% | $8.9M+19.3% | $7.5M+62.4% | $4.6M-1.4% | $4.7M-7.8% | $5.1M | $3.2M+9.5% | $3.0M+23.4% | $2.4M-3.6% | $2.5M+27.2% | $2.0M | $2.0M-2.6% | $2.0M |
| Operating Income | -$2.2M-283.9% | $1.2M+233.1% | $362Kn/m | -$540K-326.9% | $238K-92.5% | $3.2M | $462K+56.6% | $295Kn/m | -$403Kn/m | -$249Kn/m | -$1.6M | -$1.6Mn/m | -$655K |
| EBITDA | -$1.9M-231.1% | $1.5M+135.6% | $626Kn/m | -$265K-151.5% | $515K-85.0% | $3.4M | $750K+27.3% | $589Kn/m | -$177Kn/m | -$73Kn/m | -$1.4M | -$1.4Mn/m | -$491K |
| Interest Expense | $118K-5.6% | $125K+9.6% | $114K-1.7% | $116K+87.1% | $62Kn/m | $0 | $273K+100.7% | $136K+100.0% | $68K-21.8% | $87K+55.4% | $56K | $56K-18.8% | $69K |
| Income Tax | -$411K-166.9% | $614Kn/m | $0n/m | $0n/m | $0n/m | -$600K | $1.0M0.0% | $1.0Mn/m | -$29K-1550.0% | $2K0.0% | $2K | N/A | $9K |
| Net Income | -$2.8M-255.8% | $1.8M+345.0% | $398Kn/m | -$463K-11675.0% | $4K-99.9% | $2.8M | $1.1Mn/m | -$221Kn/m | -$754Kn/m | -$902Kn/m | -$1.6M | -$1.6Mn/m | -$658K |
| EPS (Basic) | -$0.57-258.3% | $0.36+300.0% | $0.09-10.0% | $0.10n/m | $0.00-100.0% | $0.54 | $0.55+161.9% | $0.21 | N/A | N/A | N/A | N/A | N/A |
| EPS (Diluted) | -$0.57-267.6% | $0.34+325.0% | $0.08-20.0% | $0.10n/m | $0.00-100.0% | $0.53 | $0.55+161.9% | $0.21 | N/A | N/A | N/A | N/A | N/A |
| Diluted Shares (Avg) | 5M-5.6% | 5M+6.8% | 5M+2.4% | 5M-11.1% | 5M-0.5% | 5M | 5M-1.4% | 5M | N/A | N/A | N/A | N/A | N/A |
No annual filing on record for: FY2016.
BNSOF Balance Sheet
Figures in USD, abbreviated K (thousand), M (million), B (billion), T (trillion). Negative values carry a minus sign and red type. Each change compares the year with the year before it, and each quarter with the same quarter a year earlier.
| Metric | FY22Filing | FY21Filing | FY20Filing | FY19Filing | FY18Filing | FY17Filing | FY15Filing | FY14Filing | FY13Filing | FY12Filing | FY11Filing | FY11Filing | FY10Filing |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total Assets | $23.8M-10.1% | $26.4M+9.2% | $24.2M+7.6% | $22.5M-9.2% | $24.8M+18.1% | $21.0M | N/A | N/A | N/A | N/A | N/A | $21.8M | N/A |
| Current Assets | $11.5M-14.1% | $13.4M+13.2% | $11.9M+13.9% | $10.4M-8.6% | $11.4M+47.0% | $7.7M | N/A | N/A | N/A | N/A | N/A | $14.2M | N/A |
| Cash & Equivalents | $6.7M-33.0% | $10.1M+10.4% | $9.1M+21.0% | $7.5M-14.0% | $8.8M+133.7% | $3.7M | N/A | N/A | $2.2M-28.5% | $3.0M-44.3% | $5.4M | $5.4M-33.4% | $8.1M |
| Short-Term Investments | $0n/m | $0n/m | $0n/m | $0n/m | $0n/m | $0 | N/A | N/A | $0n/m | $0n/m | $0 | $0n/m | $0 |
| Inventory | $2.1M+93.9% | $1.1M-6.9% | $1.2M+42.1% | $829K-18.1% | $1.0M-0.6% | $1.0M | N/A | N/A | N/A | N/A | N/A | $4.8M | N/A |
| Long-Term Investments | $0n/m | $0n/m | $0n/m | $0n/m | $0n/m | $0 | N/A | N/A | $0n/m | $0n/m | $0 | $0n/m | $0 |
| Total Liabilities | $8.4M-6.8% | $9.0M-4.4% | $9.4M+28.6% | $7.3M-4.3% | $7.7M+42.7% | $5.4M | N/A | N/A | N/A | N/A | N/A | $10.5M | N/A |
| Current Liabilities | $4.6M-14.3% | $5.4M-11.6% | $6.1M+47.7% | $4.2M-4.9% | $4.4M-16.7% | $5.2M | N/A | N/A | N/A | N/A | N/A | $7.4M | N/A |
| Non-Current Liabilities | $3.8M+4.4% | $3.6M+9.2% | $3.3M+3.6% | $3.2M-3.5% | $3.3M+2496.1% | $127K | N/A | N/A | N/A | N/A | N/A | $3.2M | N/A |
| Long-Term Debt | $2.9M+5.4% | $2.8M+13.7% | $2.4M-1.9% | $2.5M-1.7% | $2.5Mn/m | $0 | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| Total Equity | $15.3M-11.8% | $17.4M+17.8% | $14.8M-2.5% | $15.1M-11.4% | $17.1M+9.6% | $15.6M | N/A | N/A | N/A | N/A | N/A | $11.3M-4.6% | $11.8M |
| Retained Earnings | -$7.1Mn/m | -$4.3Mn/m | -$6.1Mn/m | -$6.5Mn/m | -$6.0Mn/m | -$6.0M | N/A | N/A | N/A | N/A | N/A | -$10.9M | N/A |
Not reported in any period shown, so not listed: Accounts Receivable, Goodwill.
No annual filing on record for: FY2016.
BNSOF Cash Flow Statement
Figures in USD, abbreviated K (thousand), M (million), B (billion), T (trillion). Negative values carry a minus sign and red type. Each change compares the year with the year before it, and each quarter with the same quarter a year earlier.
| Metric | FY22Filing | FY21Filing | FY20Filing | FY19Filing | FY18Filing | FY17Filing | FY15Filing | FY14Filing | FY13Filing | FY12Filing | FY11Filing | FY11Filing | FY10Filing |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Operating Cash Flow | -$2.0M-199.9% | $2.0M+71.3% | $1.2M+7620.0% | $15K-99.5% | $2.8M-11.4% | $3.1M | $3.9M+45.6% | $2.6Mn/m | -$187K-139.5% | $474Kn/m | -$1.2M | -$1.2M-134.1% | $3.5M |
| Depreciation & Amortization | $285K+5.9% | $269K+1.9% | $264K-4.0% | $275K-0.7% | $277K+2.2% | $271K | $288K-2.0% | $294K+30.1% | $226K+28.4% | $176K-15.4% | $208K | $208K+26.8% | $164K |
| Stock-Based Compensation | N/A | N/A | N/A | N/A | $0n/m | $0 | $801K | N/A | N/A | N/A | N/A | N/A | N/A |
| Capital Expenditures | $1.2M+72.1% | $700K+169.2% | $260K-55.0% | $578K+58.8% | $364K+26.0% | $289K | $823K-25.5% | $1.1M-21.7% | $1.4M-58.7% | $3.4M+144.5% | $1.4M | $1.4M+184.5% | $491K |
| Free Cash Flow | -$3.2M-348.2% | $1.3M+43.0% | $898Kn/m | -$563K-123.2% | $2.4M-15.2% | $2.9M | $3.0M+96.6% | $1.5Mn/m | -$1.6Mn/m | -$2.9Mn/m | -$2.6M | -$2.6M-186.4% | $3.0M |
| Investing Cash Flow | -$1.1Mn/m | -$164Kn/m | -$630Kn/m | -$575Kn/m | -$216Kn/m | -$410K | $581Kn/m | -$132Kn/m | -$2.2Mn/m | -$3.4Mn/m | -$1.3M | -$1.3M-329.7% | $572K |
| Financing Cash Flow | -$659Kn/m | -$1.1M-168.4% | $1.7Mn/m | -$113K-107.4% | $1.5Mn/m | -$2.0M | -$3.7M-2217.6% | $176K-88.5% | $1.5M-20.9% | $1.9Mn/m | -$120K | -$120Kn/m | -$4.4M |
| Dividends Paid | $0n/m | $0n/m | $0n/m | $0n/m | $0n/m | $0 | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| Share Buybacks | N/A | $190K+59.7% | $119K-67.3% | $364K-1.1% | $368K0.0% | $368K | $1.5M | N/A | N/A | N/A | N/A | N/A | N/A |
No annual filing on record for: FY2016.
BNSOF Financial Ratios
Margins and returns are percentages; the remaining ratios are unitless multiples. Each change compares the year with the year before it, and each quarter with the same quarter a year earlier.
| Metric | FY22Filing | FY21Filing | FY20Filing | FY19Filing | FY18Filing | FY17Filing | FY15Filing | FY14Filing | FY13Filing | FY12Filing | FY11Filing | FY11Filing | FY10Filing |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross Margin | 48.1%-13.8pp | 61.9%+5.3pp | 56.5%+16.9pp | 39.6%0.0pp | 39.6%-0.9pp | 40.5% | 20.2%+11.7pp | 8.5%-8.3pp | 16.9%+2.2pp | 14.6%+1.8pp | 12.8% | 12.8%-4.2pp | 17.0% |
| Operating Margin | -15.0%-22.7pp | 7.7%+5.0pp | 2.8%+8.2pp | -5.4%-7.5pp | 2.1%-14.6pp | 16.7% | 1.6%+0.7pp | 0.9%+2.3pp | -1.3%-0.4pp | -0.9%+4.8pp | -5.8% | -5.8%-3.5pp | -2.3% |
| Net Margin | -18.6%-30.0pp | 11.4%+8.3pp | 3.0%+7.7pp | -4.6%-4.7pp | 0.0%-14.7pp | 14.8% | 3.8%+4.5pp | -0.7%+1.8pp | -2.5%+0.9pp | -3.4%+2.1pp | -5.5% | -5.5%-3.2pp | -2.3% |
| Return on Equity | -18.0%-28.2pp | 10.2%+7.5pp | 2.7%+5.8pp | -3.1%-3.1pp | 0.0%-17.9pp | 17.9% | N/A | N/A | N/A | N/A | N/A | -13.8%-8.3pp | -5.6% |
| Return on Assets | -11.6%-18.3pp | 6.7%+5.1pp | 1.6%+3.7pp | -2.1%-2.1pp | 0.0%-13.3pp | 13.3% | N/A | N/A | N/A | N/A | N/A | -7.1% | N/A |
| Current Ratio | 2.480.0x | 2.47+0.5x | 1.93-0.6x | 2.50-0.1x | 2.61+1.1x | 1.48 | N/A | N/A | N/A | N/A | N/A | 1.93 | N/A |
| Debt-to-Equity | 0.190.0x | 0.160.0x | 0.170.0x | 0.160.0x | 0.15+0.1x | 0.00 | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| Liabilities-to-Equity | 0.550.0x | 0.52-0.1x | 0.64+0.2x | 0.480.0x | 0.45+0.1x | 0.34 | N/A | N/A | N/A | N/A | N/A | 0.93 | N/A |
| Asset Turnover | 0.620.0x | 0.590.0x | 0.54+0.1x | 0.440.0x | 0.47-0.4x | 0.90 | N/A | N/A | N/A | N/A | N/A | 1.30 | N/A |
| FCF Margin | -21.5%-29.8pp | 8.2%+1.4pp | 6.9%+12.5pp | -5.6%-26.7pp | 21.0%+5.9pp | 15.1% | 10.5%+5.6pp | 4.9%+10.2pp | -5.3%+5.8pp | -11.0%-1.9pp | -9.1% | -9.1%-19.6pp | 10.5% |
No annual filing on record for: FY2016.
Similar Companies
Newest fiscal year on record for each company. The health score is the peer-relative Financial Health Score for that year; a dash means no score is published for it. Market cap is stated at each company's latest close.
| Company | Fiscal year | Revenue | Net income | Net margin | Market cap | Health score |
|---|---|---|---|---|---|---|
| Bonso Electrs Intl Inc BNSOF | FY2022 | $14.8M | -$2.8M | -18.6% | $8.2M | — |
| Scientific Industries Inc SCND | FY2025 | $5.1M | -$1.2M | -24.1% | $7.2M | — |
| Track Group Inc TRCK | FY2025 | $35.2M | -$1.9M | -5.3% | $17.8M | — |
Where Bonso Electrs Intl Inc Ranks
Frequently Asked Questions
Bonso Electrs Intl Inc (BNSOF) reported $14.8M in total revenue for fiscal year 2022. This represents a -5.1% change compared to the previous fiscal year. Revenue measures the total income earned from the company's primary business operations before any expenses are deducted.
Bonso Electrs Intl Inc (BNSOF) revenue declined by 5.1% year-over-year, from $15.6M to $14.8M in fiscal year 2022.
No, Bonso Electrs Intl Inc (BNSOF) reported a net loss of $2.8M in fiscal year 2022, with a net profit margin of -18.6%.
Bonso Electrs Intl Inc (BNSOF) had EBITDA of -$1.9M in fiscal year 2022, measuring earnings before interest, taxes, depreciation, and amortization.
As of fiscal year 2022, Bonso Electrs Intl Inc (BNSOF) had $6.7M in cash and equivalents against $2.9M in long-term debt.
Bonso Electrs Intl Inc (BNSOF) had a gross margin of 48.1% in fiscal year 2022, indicating the percentage of revenue retained after direct costs of goods sold.
Bonso Electrs Intl Inc (BNSOF) had an operating margin of -15.0% in fiscal year 2022, reflecting the profitability of core business operations before interest and taxes.
Bonso Electrs Intl Inc (BNSOF) had a net profit margin of -18.6% in fiscal year 2022, representing the share of revenue converted into profit after all expenses.
Bonso Electrs Intl Inc (BNSOF) has a return on equity of -18.0% for fiscal year 2022, measuring how efficiently the company generates profit from shareholder equity.
Bonso Electrs Intl Inc (BNSOF) recorded an outflow of $3.2M in free cash flow during fiscal year 2022. This represents a -348.2% change compared to the previous fiscal year. Free cash flow represents the cash a company generates after accounting for capital expenditures, and is widely used to assess financial flexibility and shareholder value.
Bonso Electrs Intl Inc (BNSOF) recorded an outflow of $2.0M in operating cash flow during fiscal year 2022, representing cash used by core business activities.
Bonso Electrs Intl Inc (BNSOF) had $23.8M in total assets as of fiscal year 2022, including both current and long-term assets.
Bonso Electrs Intl Inc (BNSOF) invested $1.2M in capital expenditures during fiscal year 2022, funding long-term assets and infrastructure.
Bonso Electrs Intl Inc (BNSOF) invested $237K in research and development during fiscal year 2022.
Bonso Electrs Intl Inc (BNSOF) had a current ratio of 2.48 as of fiscal year 2022, which is generally considered healthy.
Bonso Electrs Intl Inc (BNSOF) had a debt-to-equity ratio of 0.19 as of fiscal year 2022. We compute it as long-term debt divided by total shareholder equity, where long-term debt is the noncurrent part of the company's borrowings, so debt due within the next twelve months is not counted.
Bonso Electrs Intl Inc (BNSOF) had a liabilities-to-equity ratio of 0.55 as of fiscal year 2022, which is total liabilities divided by total shareholder equity. Total liabilities counts every obligation on the balance sheet (payables, deposits, insurance reserves and deferred taxes as well as borrowings), so this ratio usually runs well above debt-to-equity.
Bonso Electrs Intl Inc (BNSOF) had a return on assets of -11.6% for fiscal year 2022, measuring how efficiently the company uses its assets to generate profit.
Bonso Electrs Intl Inc (BNSOF) has no price-to-earnings ratio at the moment: net loss, so no earnings multiple (FY2022). The market capitalization is $8.2M as of Nov 2, 2026; a multiple compares that price with a filed figure and says nothing about the quality of the business.
Bonso Electrs Intl Inc (BNSOF) trades at 0.6x sales, its market capitalization divided by $14.8M revenue, FY2022. The market capitalization is $8.2M as of Nov 2, 2026; a multiple compares that price with a filed figure and says nothing about the quality of the business.
At the end of fiscal year 2022, Bonso Electrs Intl Inc (BNSOF) held $6.7M in cash, cash equivalents and investments, and reported an operating cash outflow of $2.0M over that year. Dividing the one by the other, the reported balance equals about 41 months of the outflow reported that year. This is arithmetic over figures already filed, not a projection: it assumes nothing about future spending, financing or operations.
Bonso Electrs Intl Inc (BNSOF) has an Altman Z-Score of 0.83, placing it in the Distress Zone (elevated bankruptcy risk). The Z-Score combines five financial ratios (working capital, retained earnings, EBIT, market capitalization, and revenue relative to total assets) to predict the likelihood of bankruptcy. Scores above 2.99 indicate financial safety while scores below 1.81 suggest financial distress. Learn more in our complete guide to financial health indicators.
Bonso Electrs Intl Inc (BNSOF) has a Piotroski F-Score of 4 out of 9, indicating neutral financial health. The F-Score evaluates nine binary signals across profitability (positive ROA, positive cash flow, improving ROA, earnings quality), leverage (decreasing debt, improving liquidity, no share dilution), and operating efficiency (improving gross margin, improving asset turnover). Scores of 7 to 9 indicate strong and improving fundamentals. Learn more in our complete guide to financial health indicators.
Bonso Electrs Intl Inc (BNSOF) reported a net loss of $2.8M while operations used $2.0M of cash. With neither figure positive, the ratio between the two carries no quality signal. This ratio compares operating cash flow to net income. A ratio above 1.0x means the company generates more cash than its reported earnings, indicating sustainable, cash-backed profits. Ratios below 1.0x suggest earnings rely on accounting accruals rather than actual cash generation. Learn more in our complete guide to financial health indicators.
Bonso Electrs Intl Inc (BNSOF) reported an operating loss of $2.2M against $118K in interest expense. There is no operating profit to cover interest, so interest must be met from cash reserves or from financing rather than from operations. This ratio divides operating income by interest expense. Ratios above 5x indicate strong debt-servicing ability, while ratios below 2x suggest the company may face difficulty meeting interest payments if earnings decline. Learn more in our complete guide to financial health indicators.