Cisco Systems Inc. (NASDAQ:CSCO)

Debt to Equity

The debt to equity ratio exhibits a steady decline from 0.73 in 2019 to a low of 0.19 in 2023, indicating a consistent reduction in the company’s reliance on debt financing relative to equity. However, there is a notable increase to 0.68 in 2024, suggesting a significant rise in debt levels or a relative decrease in equity during the latest period.

Debt to Equity (Including Operating Lease Liability)

This ratio follows a similar pattern to the traditional debt to equity ratio, declining from 0.73 in 2019 to 0.21 in 2023, then increasing sharply to 0.71 in 2024. The inclusion of operating lease liabilities does not materially alter the trend but reflects the same shift toward higher leverage in the most recent year.

Debt to Capital

The debt to capital ratio shows a continuous decrease from 0.42 in 2019 to 0.16 in 2023, pointing to an improved capital structure with less debt relative to total capital. Like the debt to equity ratio, this metric rises considerably in 2024 to 0.41, indicating a reversal in the deleveraging trend.

Debt to Capital (Including Operating Lease Liability)

This measure mirrors the trend observed in debt to capital, with a steady decline through 2023, followed by a sharp increase in 2024. The operating lease liabilities do not significantly change the overall movement but reinforce the observation of increased leverage in the latest period.

Debt to Assets

The debt to assets ratio decreases progressively over five years, from 0.25 in 2019 to 0.08 in 2023, suggesting a reduction in debt obligations relative to total assets, hence a stronger asset base or less reliance on debt. This ratio shows a pronounced increase to 0.25 in 2024, aligning with the trend of increased debt usage seen in other leverage ratios.

Debt to Assets (Including Operating Lease Liability)

The ratio including operating leases follows an almost identical trajectory to the traditional debt to assets ratio, declining steadily until 2023 and then rising sharply in 2024. This similarity indicates that operating lease liabilities have a consistent but limited impact on this leverage measure.

Financial Leverage

Financial leverage decreases from 2.91 in 2019 to 2.3 in 2023, indicating less reliance on debt funding relative to equity over the period. In 2024, financial leverage increases significantly to 2.74, suggesting a shift toward more leveraged financial structuring.

Interest Coverage

Interest coverage ratio demonstrates a strong upward trend from 17.96 in 2019 to a peak of 41.21 in 2022, reflecting enhanced ability to cover interest expenses through operating earnings. However, there is a sharp decline to 13.16 in 2024, indicating a decreased capacity to meet interest obligations, potentially due to increased interest expenses or reduced earnings.

Fixed Charge Coverage

This ratio increases steadily from 12.28 in 2019 to 20.3 in 2022, signifying improved capability to cover fixed charges including interest and lease expenses. Like interest coverage, it falls markedly to 9.58 in 2024, pointing to reduced financial flexibility or higher fixed charges in the most recent year.

The analysis of the financial data over the six-year period reveals several noteworthy trends in the company's capital structure, particularly regarding debt, equity, and the debt-to-equity ratio.

Total Debt

There is a significant decline in total debt from 24,666 million USD in 2019 to 8,391 million USD in 2023, indicating a consistent reduction in borrowings over this five-year span. However, in 2024, total debt increases sharply to 30,962 million USD, reversing the downward trend observed previously.

Equity

Equity shows a generally upward trajectory, growing from 33,571 million USD in 2019 to 45,457 million USD in 2024. There is steady growth each year except a slight decline in 2022. This increase in equity suggests a strengthening of the company's net asset base over time.

Debt to Equity Ratio

The debt-to-equity ratio declines substantially from 0.73 in 2019 to 0.19 in 2023, reflecting the simultaneous decrease in debt and increase in equity, which implies an improvement in financial leverage and potentially lower financial risk. However, in 2024, this ratio rises again to 0.68, signaling a notable increase in leverage consistent with the sharp increase in total debt.

Overall, the period from 2019 to 2023 exhibits a clear strategy of deleveraging with an emphasis on strengthening equity. The sudden increase in total debt and the corresponding rise in the debt-to-equity ratio in 2024 suggest a shift towards higher leverage, which may reflect changes in financing strategy, investment activities, or other operational requirements in the most recent year.

The analysis of the financial data reveals distinct trends in debt, equity, and leverage ratios across the periods examined.

Total Debt (including operating lease liability)

Total debt showed a decreasing trend from 24,666 million USD in July 2019 to 9,411 million USD in July 2023. However, there was a substantial increase in the latest period, rising sharply to 32,232 million USD in July 2024. This represents a significant reversal after several years of reducing debt levels.

Equity

Equity increased steadily over the time frame, starting at 33,571 million USD in July 2019 and reaching 45,457 million USD by July 2024. Despite some minor fluctuation, the overall progression indicates consistent growth in owners’ equity, reflecting either retained earnings accumulation, additional capital injection, or positive valuation adjustments.

Debt to Equity Ratio (including operating lease liability)

The debt to equity ratio exhibited a declining trend from 0.73 in July 2019 to a low of 0.21 in July 2023, indicating improved leverage and lower financial risk over these years. This was driven primarily by decreasing debt combined with rising equity. However, in July 2024, the ratio increased sharply back to 0.71, nearly returning to the initial level registered in 2019. This sharp rise corresponds with the marked increase in total debt during the same period, suggesting a renewed reliance on debt financing.

In summary, the data demonstrates a period of deleveraging and strengthening equity from 2019 to 2023, culminating in a return to considerably higher leverage in the most recent fiscal year. This pattern suggests a strategic shift or a response to external conditions necessitating increased debt after years of conservative financial management. Continued monitoring of the company's leverage and debt servicing capacity will be important to assess potential financial risk going forward.

Total Debt

The total debt displays a significant downward trend between July 2019 and July 2023, declining from 24,666 million USD to 8,391 million USD. This suggests a strong reduction in leverage during this period. However, in July 2024, total debt rises sharply to 30,962 million USD, which is the highest value recorded in the given timeframe.

Total Capital

Total capital demonstrates a fluctuating trend. It decreases from 58,237 million USD in July 2019 to a low of 49,288 million USD in July 2022, reflecting a contraction in total capital over these years. Subsequently, it rebounds modestly to 52,744 million USD in July 2023, followed by a substantial increase to 76,419 million USD in July 2024, which indicates a sizable expansion of capital in the latest period.

Debt to Capital Ratio

The debt to capital ratio exhibits a consistent downward trend from 0.42 in July 2019 to 0.16 in July 2023, signifying decreasing leverage relative to total capital over several years. In July 2024, the ratio increases markedly to 0.41, nearly returning to the initial level observed in 2019. This reversal corresponds with the sharp rise in total debt and the rise in total capital, suggesting a shift in the company’s capital structure towards increased reliance on debt financing during the most recent period.

Total debt (including operating lease liability)

The total debt experienced a significant decline from 24,666 million USD in 2019 to 9,411 million USD in 2023. This trend indicates a consistent reduction in debt over these years. However, in 2024, the debt sharply increased to 32,232 million USD, suggesting a substantial change in the company’s financing or borrowing strategy during that period.

Total capital (including operating lease liability)

Total capital showed a general decline from 58,237 million USD in 2019 to 50,334 million USD in 2022, followed by a small increase to 53,764 million USD in 2023. In 2024, total capital rose significantly to 77,689 million USD. This upward movement correlates with the increase in total debt in 2024, indicating an overall expansion in the company's capital base.

Debt to capital (including operating lease liability) ratio

The debt to capital ratio steadily decreased from 0.42 in 2019 to 0.18 in 2023, showing an improvement in the company’s leverage position and a reduction in reliance on debt financing relative to total capital. In 2024, however, this ratio increased sharply to 0.41, reflecting the considerable rise in total debt that year. This suggests a reversal in the previous deleveraging trend, resulting in a higher financial leverage.

The financial data over the six-year period reveals several notable trends related to the company's debt levels, asset base, and leverage ratios.

Total Debt

The total debt shows a significant decline from US$24,666 million in 2019 to US$8,391 million in 2023. However, in 2024, there is a sharp increase to US$30,962 million, more than tripling from the previous year. This exhibits a pattern of initial debt reduction over four years, followed by a substantial increase in the latest period.

Total Assets

Total assets fluctuate moderately, beginning at US$97,793 million in 2019, dipping slightly in subsequent years, and then rising to US$101,852 million in 2023. The largest increase is observed in 2024, where assets jump to US$124,413 million, indicating significant asset growth during that final year.

Debt to Assets Ratio

The debt to assets ratio similarly trends downward from 0.25 in 2019 to a low of 0.08 in 2023, consistent with the reduction in debt relative to assets. However, this ratio returns to 0.25 in 2024, aligning with the large increase in total debt and total assets observed in the same year. This suggests that the increased debt is proportional to the increased asset base, restoring the leverage ratio to its initial level.

Overall, the data illustrates a period of deleveraging from 2019 to 2023, marked by a gradual reduction in both absolute debt and debt relative to assets. The year 2024 marks a reversal of this trend, with a notable increase in both debt and assets, resulting in a leverage ratio comparable to levels seen in 2019. This substantial change may reflect new financing activity or strategic asset acquisitions undertaken in that year.

Total Debt (including operating lease liability)

The total debt shows a significant decline from 24,666 million US dollars in 2019 to a low of 9,411 million US dollars by 2023. However, in 2024, there is a substantial increase to 32,232 million US dollars. This represents a notable deviation from the decreasing trend observed in the previous years.

Total Assets

Total assets fluctuate slightly over the years, starting at 97,793 million US dollars in 2019. Following a dip to 94,002 million US dollars in 2022, the figure rises again significantly, reaching 124,413 million US dollars in 2024. This indicates an overall growing asset base, particularly notable in the most recent year.

Debt to Assets Ratio (including operating lease liability)

The debt to assets ratio decreases steadily from 0.25 in 2019 to 0.09 in 2023, reflecting improved financial leverage and a stronger asset position relative to debt. However, in 2024, the ratio surges to 0.26, marking a rapid reversal consistent with the sharp increase in total debt and asset growth, suggesting increased financial leverage and potentially higher risk exposure.

Total assets

The total assets exhibited a fluctuating trend over the examined periods. Starting at approximately $97.8 billion in July 2019, assets declined slightly by 3% in 2020 before recovering to nearly the original level in 2021. A minor reduction appeared in 2022, followed by a pronounced increase reaching about $124.4 billion by July 2024, marking a substantial growth of nearly 27% from the initial observation.

Equity

Equity demonstrated a consistent upward trajectory during the reported years. From $33.6 billion in July 2019, equity rose steadily each year to reach $45.5 billion in July 2024. This represents an overall increase of approximately 35%, indicating strengthening ownership positions and capital base over time.

Financial leverage ratio

The financial leverage ratio showed a general decrease from 2.91 in July 2019 to a low of 2.3 in July 2023, suggesting a trend toward reduced leverage and potentially less reliance on debt financing in relation to equity. However, in the most recent period ending July 2024, the leverage ratio increased to 2.74, indicating a resurgence in leverage levels. This shift could imply a change in capital structure strategy or financing conditions in the latest year.

Earnings before Interest and Tax (EBIT)

The EBIT shows a fluctuating trend over the observed periods. Starting at 15,430 million USD in 2019, it decreased consistently for two years, reaching a low of 13,696 million USD in 2021. This was followed by an increase to 15,745 million USD in 2023 before declining again to 13,240 million USD in 2024. Overall, the EBIT does not show a clear upward or downward trajectory but rather variability with notable declines in 2021 and 2024.

Interest Expense

Interest expense displayed a general declining trend from 859 million USD in 2019 to a minimum of 360 million USD in 2022. However, the years following saw a reversal of this trend, with interest expense increasing sharply to 1,006 million USD in 2024, marking the highest expense within the observed timeframe.

Interest Coverage Ratio

The interest coverage ratio demonstrated a strengthening position from 17.96 in 2019, peaking at 41.21 in 2022, indicating improved ability to cover interest expenses from operating earnings during this period. Nevertheless, there was a significant decline in 2024 to 13.16, suggesting a season of reduced capacity to meet interest obligations relative to EBIT, which coincides with the rise in interest expense and the decrease in EBIT observed in the same year.

Overall Insights

The financial data suggests a period of relative financial strength up to 2022, characterized by stable EBIT and reduced interest expenses, leading to improved interest coverage ratios. The subsequent period saw a deterioration in both EBIT and interest coverage, accompanied by increased interest costs in 2024. This combination could indicate rising financing costs or changes in capital structure that may warrant further investigation. Monitoring these trends is important for assessing financial risk and operational profitability going forward.

Earnings before Fixed Charges and Tax

The earnings before fixed charges and tax exhibited a generally fluctuating trend over the six-year period. Starting at 15,863 million US dollars in 2019, the figure declined steadily for two years to reach a low of 14,095 million in 2021. It then recovered and peaked at 16,170 million in 2023 before dropping significantly to 13,660 million in 2024, indicating variability and a notable decrease in the most recent year.

Fixed Charges

Fixed charges demonstrated a generally declining trend from 2019 through 2022. The charges decreased from 1,292 million US dollars in 2019 to a minimum of 750 million in 2022. However, there was an upward reversal in the subsequent years, with fixed charges increasing to 852 million in 2023 and sharply rising to 1,426 million in 2024. This recent increase represents a significant escalation in fixed obligations.

Fixed Charge Coverage Ratio

The fixed charge coverage ratio showed a pattern of consistent improvement from 12.28 in 2019 to a peak of 20.3 in 2022, indicative of stronger ability to cover fixed charges with earnings. This positive trend slightly declined to 18.98 in 2023, followed by a marked decrease to 9.58 in 2024. The sharp drop in the latest year suggests a weakening capacity to meet fixed charges from earnings, largely influenced by the simultaneous decrease in earnings and increase in fixed charges.