The Empire District Electric Company, headquartered in Joplin, Missouri, provides electric services and also distributes natural gas to customers primarily in the states of Missouri, Kansas, Oklahoma, and Arkansas. A devastating tornado with winds exceeding 200 miles per hour hit Joplin on May 22, 2011, killing over 160 people. Property damage was extensive with a path of destruction over 13 miles long and up to three-fourths of a mile wide. For Empire District, 4,000 power poles and 100 miles of electric lines were down; six substations were damaged leaving approximately 20,000 customers without power. The company suspended its in the face of storm costs that might reach $30 million. The following summary financial items are taken from the for the year ending December 31, 2011 (dollars in thousands):
Total assets ………. $2,021,835
Current liabilities…….. 97,029
Shareholders’ equity ……. 693,989
Interest expense …….. 41,302
Pretax income …….. 96,273
Assume that all long-term liabilities are in the form of long-term debt. Compute the following four ratios. In one sentence per ratio, explain what it tells you about Empire District.
4. Interest-coverage ratio