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2 years ago

One of of three Korean companies have an interest coverage ratio below 1

Arirang News
Arirang News
영업이익으로 이자 충당 못하는 기업 '32%'…8년만에 최다

A sobering report from Korea's central bank shows that more Korean companies are struggling to pay back interest on their debt.
Our business correspondent Kim Hyesung has the details.
One out of three Korean firms were unable to make interest payments on their debt,... using just their earnings.
According to the Bank of Korea's financial stability report Thursday, out of the 21-thousand Korean companies surveyed,... 32 percent had a interest coverage ratio below one, the highest figure since 2010.
The interest coverage ratio is calculated by dividing a company's operating profit by its interest expenses.
A ratio below one means,... the firm's interest payment obligations are higher than its reported earnings over the cited period.
Around 24 percent of large-sized companies had an interest coverage ratio below one,... while 34 percent of small and mid-sized firms had a ratio that fell short of that threshold.
14 percent of all companies were classified zombie firms,... unable to meet debt obligations with their earnings for three straight years.
By sector, shipbuilding, autos, lodging and dining saw a high proportion of companies with an interest coverage ratio below one.
The central bank attributed this... to falling corporate profits and higher borrowing costs that were seen last year.
It added,... that if business conditions deteriorate amid the escalating U.S.-China trade spat,... those with an interest coverage ratio below one could surpass 37 percent.
As for household debt,... the pace of debt growth slowed to around five percent on-year,... with total debt amounting to 1-point-three trillion US dollars at the end of the first quarter.
But, the ratio of household debt to disposable income was seen at 158 percent as of the end of March,... up nearly 2 percentage points compared to a year ago.
That means household debt grew at a faster pace than household income,... a serious concern for Korean families and their financial health.
Kim Hyesung, Arirang News.

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