Debt Servicing ratio for SIA

That's right, Chris! So not all dividend stocks pay interest expense. Sometimes they may have more cash than debt which will earn them more interest income. This is a pass for Step 4.

Hello, am new to this space too and wanted to check my understanding for step 4 on SIA Engineering (reference used for full year of group from 2023-2024: https://www.siaec.com.sg/pdf/Financial_Results_ending_March_2024.pdf ) 

i got really different numbers from Chris (but managed to find his references in the SIA report) and wanted to see if the numbers extracted from the SIA engineering report was right. Here's what i got:

finance charge: -4.4
interest income: 24.4
net operating cashflow 100.4

debt service ratio = (-4.4 - 24.4) / 100.4 = -0.28

I'm confused about the negative debt service ratio. 

Hi Nyx

Welcome to DM.

Your calculation is correct! I show you SIAEC example because I want to show you guys that not every companies are in the net debt position (net interest expense). SIAEC had more cash than debt and that's why we see net interest income which translates to negative debt to servicing ratio. This instantly a pass for Debt to Servicing ratio. You can then move on to the rest of the DM Steps.

Thanks for the direct link :)

Adding on to Nyx questions, I noticed that interest expense and interest income can be found in both Cash Flow statement and Income Statement. Using the SIA Company as an example, in the Cash Flow statement, interest expense is 4.4 and interest income is -24.4. However, in the Income Statement, interest expense is -4.4 and interest income is 24.4.

Question 1: As the signs in both Cash Flow and Income are different, which figures do I refer to?

Question 2: In the Cash Flow statement, since interest expense is an outgoing cash flow, why is the interest expenses a positive value i.e. 4.4?

The cashflow statement makes adjustment for actual cash inflow and outflow. Since interest expense isn't part of the cashflow from operation, accountant usually reverse the figures and add them back under cashflow from financing activities. The plus and minus is just a way for them to do reclassification. To keep it really simple for our calculation, we usually ignore the negative sign when calculating the debt to servicing ratio. You can read this book How to Read Financial Report by John Tracy if you would like to understand the nuances of accounting.