Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
PayPal Holdings Inc., solvency ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
Between 2018 and 2022, a consistent increase in debt utilization is observed across multiple solvency metrics. The organization has progressively transitioned toward a higher leverage profile, characterized by an increase in the proportion of debt relative to equity, capital, and total assets.
- Debt-to-Equity and Capital Ratios
- The debt-to-equity ratio rose from 0.13 in 2018 to 0.53 by 2022, with a similar trajectory observed when including operating lease liabilities, which reached 0.57. Debt to capital followed a comparable upward trend, increasing from 0.11 to 0.35. This indicates a strategic shift toward increased debt financing over the five-year period.
- Asset-Based Leverage
- The debt-to-assets ratio grew from 0.05 in 2018 to 0.14 in 2022. Financial leverage also experienced a steady climb, moving from 2.82 to 3.88, reflecting an expanded use of borrowed funds to support the asset base.
- Coverage Ratios
- A significant downward trend is evident in the capacity to service debt. Interest coverage declined from 31.86 in 2018 to 12.07 in 2022. Similarly, the fixed charge coverage ratio decreased from 14.89 to 8.09 over the same period. While these ratios remain comfortably above 1.0, the contraction suggests a narrowing margin of safety for meeting fixed financial obligations.
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Debt to Equity
PayPal Holdings Inc., debt to equity calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | —) | —) | —) | —) | 1,998) | |
| Current portion of long-term debt | 418) | 999) | —) | —) | —) | |
| Long-term debt, excluding current portion | 10,417) | 8,049) | 8,939) | 4,965) | —) | |
| Total debt | 10,835) | 9,048) | 8,939) | 4,965) | 1,998) | |
| Total PayPal stockholders’ equity | 20,274) | 21,727) | 20,019) | 16,885) | 15,386) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.53 | 0.42 | 0.45 | 0.29 | 0.13 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Accenture PLC | 0.00 | 0.00 | 0.00 | — | — | |
| Adobe Inc. | 0.29 | 0.28 | 0.31 | — | — | |
| AppLovin Corp. | 1.72 | 1.53 | — | — | — | |
| Cadence Design Systems Inc. | 0.27 | 0.13 | — | — | — | |
| Datadog Inc. | 0.52 | 0.71 | — | — | — | |
| International Business Machines Corp. | 2.32 | 2.74 | — | — | — | |
| Intuit Inc. | 0.42 | 0.21 | — | — | — | |
| Microsoft Corp. | 0.39 | 0.50 | — | — | — | |
| Oracle Corp. | — | 16.08 | — | — | — | |
| Palantir Technologies Inc. | 0.00 | 0.00 | — | — | — | |
| Palo Alto Networks Inc. | 17.51 | 5.08 | — | — | — | |
| Salesforce Inc. | 0.19 | 0.07 | — | — | — | |
| ServiceNow Inc. | 0.30 | 0.43 | — | — | — | |
| Synopsys Inc. | 0.00 | 0.02 | 0.03 | — | — | |
| Workday Inc. | 0.41 | 0.55 | — | — | — | |
| Debt to Equity, Sector | ||||||
| Software & Services | 0.71 | 0.83 | — | — | — | |
| Debt to Equity, Industry | ||||||
| Information Technology | 0.70 | 0.83 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to equity = Total debt ÷ Total PayPal stockholders’ equity
= 10,835 ÷ 20,274 = 0.53
2 Click competitor name to see calculations.
Between 2018 and 2022, a significant increase in financial leverage is observed, characterized by a substantial rise in total debt alongside a fluctuating growth pattern in stockholders' equity.
- Total Debt Trajectory
- Total debt exhibited a consistent and strong upward trend, increasing from 1,998 million US$ in 2018 to 10,835 million US$ by the end of 2022. The most aggressive expansion occurred between 2018 and 2020, during which debt levels more than quadrupled, indicating a period of significant borrowing.
- Stockholders' Equity Performance
- Equity grew steadily from 15,386 million US$ in 2018, reaching a peak of 21,727 million US$ in 2021. However, a contraction occurred in 2022, with equity decreasing to 20,274 million US$, marking the first decline in the five-year period.
- Debt to Equity Ratio Analysis
- The debt to equity ratio increased from 0.13 in 2018 to 0.53 in 2022, reflecting an increased reliance on debt financing relative to equity. Although a slight stabilization was noted between 2020 (0.45) and 2021 (0.42), the ratio reached its highest point in 2022, driven by the combination of rising total debt and declining total stockholders' equity.
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Debt to Equity (including Operating Lease Liability)
PayPal Holdings Inc., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | —) | —) | —) | —) | 1,998) | |
| Current portion of long-term debt | 418) | 999) | —) | —) | —) | |
| Long-term debt, excluding current portion | 10,417) | 8,049) | 8,939) | 4,965) | —) | |
| Total debt | 10,835) | 9,048) | 8,939) | 4,965) | 1,998) | |
| Current operating lease liabilities (included in Accrued expenses and other current liabilities) | 151) | 142) | 144) | 104) | —) | |
| Operating lease liabilities (included in Deferred tax liability and other long-term liabilities) | 569) | 620) | 642) | 403) | —) | |
| Total debt (including operating lease liability) | 11,555) | 9,810) | 9,725) | 5,472) | 1,998) | |
| Total PayPal stockholders’ equity | 20,274) | 21,727) | 20,019) | 16,885) | 15,386) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 0.57 | 0.45 | 0.49 | 0.32 | 0.13 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Accenture PLC | 0.15 | 0.18 | 0.21 | — | — | |
| Adobe Inc. | 0.33 | 0.32 | 0.35 | — | — | |
| AppLovin Corp. | 1.76 | 1.57 | — | — | — | |
| Cadence Design Systems Inc. | 0.34 | 0.18 | — | — | — | |
| Datadog Inc. | 0.59 | 0.78 | — | — | — | |
| International Business Machines Corp. | 2.46 | 2.92 | — | — | — | |
| Intuit Inc. | 0.46 | 0.25 | — | — | — | |
| Microsoft Corp. | 0.47 | 0.58 | — | — | — | |
| Oracle Corp. | — | 16.61 | — | — | — | |
| Palantir Technologies Inc. | 0.10 | 0.11 | — | — | — | |
| Palo Alto Networks Inc. | 19.12 | 5.68 | — | — | — | |
| Salesforce Inc. | 0.25 | 0.15 | — | — | — | |
| ServiceNow Inc. | 0.44 | 0.60 | — | — | — | |
| Synopsys Inc. | 0.12 | 0.13 | 0.14 | — | — | |
| Workday Inc. | 0.46 | 0.68 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Software & Services | 0.81 | 0.93 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Information Technology | 0.76 | 0.90 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Total PayPal stockholders’ equity
= 11,555 ÷ 20,274 = 0.57
2 Click competitor name to see calculations.
Analysis of the company's solvency profile reveals a consistent increase in financial leverage over the five-year period ending December 31, 2022. The balance sheet shifted from a position of very low debt reliance to a more leveraged structure, as total debt obligations grew at a rate significantly exceeding the growth of shareholders' equity.
- Total Debt Trends
- Total debt, including operating lease liabilities, experienced a sharp upward trajectory, rising from US$ 1,998 million in 2018 to US$ 11,555 million by 2022. The most aggressive expansion of liabilities occurred between 2018 and 2020, where debt levels increased nearly fivefold.
- Stockholders' Equity Dynamics
- Equity exhibited a general growth trend from 2018 through 2021, increasing from US$ 15,386 million to a peak of US$ 21,727 million. However, a reversal occurred in 2022, with equity declining to US$ 20,274 million, which further amplified the leverage ratio at the end of the analyzed period.
- Debt to Equity Ratio Interpretation
- The debt to equity ratio rose from 0.13 in 2018 to 0.57 in 2022. While a slight contraction to 0.45 was observed in 2021, the overall trend indicates an increasing reliance on borrowed capital. The ratio peaked in 2022, driven by the compounding effect of rising total debt and a simultaneous reduction in total stockholders' equity.
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Debt to Capital
PayPal Holdings Inc., debt to capital calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | —) | —) | —) | —) | 1,998) | |
| Current portion of long-term debt | 418) | 999) | —) | —) | —) | |
| Long-term debt, excluding current portion | 10,417) | 8,049) | 8,939) | 4,965) | —) | |
| Total debt | 10,835) | 9,048) | 8,939) | 4,965) | 1,998) | |
| Total PayPal stockholders’ equity | 20,274) | 21,727) | 20,019) | 16,885) | 15,386) | |
| Total capital | 31,109) | 30,775) | 28,958) | 21,850) | 17,384) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.35 | 0.29 | 0.31 | 0.23 | 0.11 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Accenture PLC | 0.00 | 0.00 | 0.00 | — | — | |
| Adobe Inc. | 0.23 | 0.22 | 0.24 | — | — | |
| AppLovin Corp. | 0.63 | 0.60 | — | — | — | |
| Cadence Design Systems Inc. | 0.21 | 0.11 | — | — | — | |
| Datadog Inc. | 0.34 | 0.41 | — | — | — | |
| International Business Machines Corp. | 0.70 | 0.73 | — | — | — | |
| Intuit Inc. | 0.30 | 0.17 | — | — | — | |
| Microsoft Corp. | 0.28 | 0.33 | — | — | — | |
| Oracle Corp. | 1.09 | 0.94 | — | — | — | |
| Palantir Technologies Inc. | 0.00 | 0.00 | — | — | — | |
| Palo Alto Networks Inc. | 0.95 | 0.84 | — | — | — | |
| Salesforce Inc. | 0.16 | 0.06 | — | — | — | |
| ServiceNow Inc. | 0.23 | 0.30 | — | — | — | |
| Synopsys Inc. | 0.00 | 0.02 | 0.03 | — | — | |
| Workday Inc. | 0.29 | 0.35 | — | — | — | |
| Debt to Capital, Sector | ||||||
| Software & Services | 0.42 | 0.45 | — | — | — | |
| Debt to Capital, Industry | ||||||
| Information Technology | 0.41 | 0.45 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to capital = Total debt ÷ Total capital
= 10,835 ÷ 31,109 = 0.35
2 Click competitor name to see calculations.
The capital structure from 2018 to 2022 exhibits a progressive increase in financial leverage, characterized by a substantial growth in total debt relative to total capital. While both metrics increased over the five-year period, the rate of debt accumulation significantly outpaced the growth of the overall capital base, leading to a heightened solvency risk profile.
- Total Debt Expansion
- A significant upward trend is observed in total debt, which rose from US$ 1,998 million in 2018 to US$ 10,835 million in 2022. The most rapid acceleration occurred between 2018 and 2020, during which debt levels increased by approximately 347%. Following this period of aggressive borrowing, the growth rate moderated in 2021 before rising again in 2022.
- Total Capital Growth
- Total capital demonstrated steady growth, increasing from US$ 17,384 million in 2018 to US$ 31,109 million in 2022. This consistent rise indicates an expanding funding base, although the growth was more linear and less volatile than that of the debt component.
- Debt to Capital Ratio Trajectory
- The debt to capital ratio trended upward from 0.11 in 2018 to 0.35 in 2022. The ratio climbed sharply to 0.31 by 2020, experienced a slight contraction to 0.29 in 2021, and ultimately reached its peak in 2022. This trajectory indicates that debt has become a more prominent component of the company's capital structure, shifting the balance of financing toward borrowed funds.
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Debt to Capital (including Operating Lease Liability)
PayPal Holdings Inc., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | —) | —) | —) | —) | 1,998) | |
| Current portion of long-term debt | 418) | 999) | —) | —) | —) | |
| Long-term debt, excluding current portion | 10,417) | 8,049) | 8,939) | 4,965) | —) | |
| Total debt | 10,835) | 9,048) | 8,939) | 4,965) | 1,998) | |
| Current operating lease liabilities (included in Accrued expenses and other current liabilities) | 151) | 142) | 144) | 104) | —) | |
| Operating lease liabilities (included in Deferred tax liability and other long-term liabilities) | 569) | 620) | 642) | 403) | —) | |
| Total debt (including operating lease liability) | 11,555) | 9,810) | 9,725) | 5,472) | 1,998) | |
| Total PayPal stockholders’ equity | 20,274) | 21,727) | 20,019) | 16,885) | 15,386) | |
| Total capital (including operating lease liability) | 31,829) | 31,537) | 29,744) | 22,357) | 17,384) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.36 | 0.31 | 0.33 | 0.24 | 0.11 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Accenture PLC | 0.13 | 0.15 | 0.17 | — | — | |
| Adobe Inc. | 0.25 | 0.24 | 0.26 | — | — | |
| AppLovin Corp. | 0.64 | 0.61 | — | — | — | |
| Cadence Design Systems Inc. | 0.25 | 0.15 | — | — | — | |
| Datadog Inc. | 0.37 | 0.44 | — | — | — | |
| International Business Machines Corp. | 0.71 | 0.74 | — | — | — | |
| Intuit Inc. | 0.31 | 0.20 | — | — | — | |
| Microsoft Corp. | 0.32 | 0.37 | — | — | — | |
| Oracle Corp. | 1.08 | 0.94 | — | — | — | |
| Palantir Technologies Inc. | 0.09 | 0.10 | — | — | — | |
| Palo Alto Networks Inc. | 0.95 | 0.85 | — | — | — | |
| Salesforce Inc. | 0.20 | 0.13 | — | — | — | |
| ServiceNow Inc. | 0.31 | 0.37 | — | — | — | |
| Synopsys Inc. | 0.11 | 0.11 | 0.12 | — | — | |
| Workday Inc. | 0.32 | 0.41 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Software & Services | 0.45 | 0.48 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Information Technology | 0.43 | 0.47 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 11,555 ÷ 31,829 = 0.36
2 Click competitor name to see calculations.
A consistent upward trajectory in the leverage profile is evident between 2018 and 2022. Total debt, inclusive of operating lease liabilities, expanded significantly from US$ 1,998 million to US$ 11,555 million, while total capital grew from US$ 17,384 million to US$ 31,829 million over the same period.
- Debt Accumulation Trends
- Total debt experienced an aggressive increase, growing by approximately 477% over the five-year window. The most substantial escalation occurred between 2019 and 2020, during which liabilities rose from US$ 5,472 million to US$ 9,725 million, indicating a period of rapid funding expansion.
- Capitalization Growth
- Total capital showed a steady increase, rising from US$ 17,384 million in 2018 to US$ 31,829 million in 2022. Although the capital base nearly doubled, the rate of growth was slower than that of the total debt, contributing to the rise in the solvency ratio.
- Debt to Capital Ratio Analysis
- The debt to capital ratio increased from 0.11 in 2018 to 0.36 in 2022. The ratio more than doubled by 2019 (0.24) and continued to climb to 0.33 by 2020. A marginal contraction to 0.31 was observed in 2021, suggesting a temporary stabilization in the leverage trend before the ratio reached its peak of 0.36 in 2022.
The overall trend indicates a strategic shift toward a more leveraged capital structure. While the company has maintained a capital base that grew consistently, the acceleration of debt accumulation has resulted in a higher proportion of debt relative to total capital.
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Debt to Assets
PayPal Holdings Inc., debt to assets calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | —) | —) | —) | —) | 1,998) | |
| Current portion of long-term debt | 418) | 999) | —) | —) | —) | |
| Long-term debt, excluding current portion | 10,417) | 8,049) | 8,939) | 4,965) | —) | |
| Total debt | 10,835) | 9,048) | 8,939) | 4,965) | 1,998) | |
| Total assets | 78,717) | 75,803) | 70,379) | 51,333) | 43,332) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.14 | 0.12 | 0.13 | 0.10 | 0.05 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Accenture PLC | 0.00 | 0.00 | 0.00 | — | — | |
| Adobe Inc. | 0.15 | 0.15 | 0.17 | — | — | |
| AppLovin Corp. | 0.56 | 0.53 | — | — | — | |
| Cadence Design Systems Inc. | 0.15 | 0.08 | — | — | — | |
| Datadog Inc. | 0.25 | 0.31 | — | — | — | |
| International Business Machines Corp. | 0.40 | 0.39 | — | — | — | |
| Intuit Inc. | 0.25 | 0.13 | — | — | — | |
| Microsoft Corp. | 0.18 | 0.21 | — | — | — | |
| Oracle Corp. | 0.69 | 0.64 | — | — | — | |
| Palantir Technologies Inc. | 0.00 | 0.00 | — | — | — | |
| Palo Alto Networks Inc. | 0.30 | 0.31 | — | — | — | |
| Salesforce Inc. | 0.12 | 0.04 | — | — | — | |
| ServiceNow Inc. | 0.11 | 0.15 | — | — | — | |
| Synopsys Inc. | 0.00 | 0.01 | 0.02 | — | — | |
| Workday Inc. | 0.18 | 0.21 | — | — | — | |
| Debt to Assets, Sector | ||||||
| Software & Services | 0.26 | 0.28 | — | — | — | |
| Debt to Assets, Industry | ||||||
| Information Technology | 0.26 | 0.29 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to assets = Total debt ÷ Total assets
= 10,835 ÷ 78,717 = 0.14
2 Click competitor name to see calculations.
An analysis of the solvency position reveals a consistent increase in leverage relative to the total asset base over the five-year period ending December 31, 2022.
- Total Debt Expansion
- Total debt experienced substantial growth, rising from 1,998 million US dollars in 2018 to 10,835 million US dollars by 2022. The most aggressive expansion occurred between 2018 and 2020, during which debt levels increased more than fourfold.
- Asset Base Growth
- Total assets grew steadily from 43,332 million US dollars in 2018 to 78,717 million US dollars in 2022. While the asset base expanded significantly, the growth rate was surpassed by the rate of debt accumulation during the early portion of the observed period.
- Debt to Assets Ratio Trend
- The debt to assets ratio followed a general upward trajectory, increasing from 0.05 in 2018 to 0.14 in 2022. A sharp increase is observed between 2018 and 2020, where the ratio rose from 0.05 to 0.13. Following a slight moderation to 0.12 in 2021, the ratio reached its peak of 0.14 in 2022, indicating a heightened reliance on debt financing relative to total assets.
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Debt to Assets (including Operating Lease Liability)
PayPal Holdings Inc., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | —) | —) | —) | —) | 1,998) | |
| Current portion of long-term debt | 418) | 999) | —) | —) | —) | |
| Long-term debt, excluding current portion | 10,417) | 8,049) | 8,939) | 4,965) | —) | |
| Total debt | 10,835) | 9,048) | 8,939) | 4,965) | 1,998) | |
| Current operating lease liabilities (included in Accrued expenses and other current liabilities) | 151) | 142) | 144) | 104) | —) | |
| Operating lease liabilities (included in Deferred tax liability and other long-term liabilities) | 569) | 620) | 642) | 403) | —) | |
| Total debt (including operating lease liability) | 11,555) | 9,810) | 9,725) | 5,472) | 1,998) | |
| Total assets | 78,717) | 75,803) | 70,379) | 51,333) | 43,332) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.15 | 0.13 | 0.14 | 0.11 | 0.05 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Accenture PLC | 0.07 | 0.08 | 0.09 | — | — | |
| Adobe Inc. | 0.17 | 0.17 | 0.19 | — | — | |
| AppLovin Corp. | 0.57 | 0.54 | — | — | — | |
| Cadence Design Systems Inc. | 0.18 | 0.11 | — | — | — | |
| Datadog Inc. | 0.28 | 0.34 | — | — | — | |
| International Business Machines Corp. | 0.42 | 0.42 | — | — | — | |
| Intuit Inc. | 0.27 | 0.16 | — | — | — | |
| Microsoft Corp. | 0.21 | 0.25 | — | — | — | |
| Oracle Corp. | 0.73 | 0.66 | — | — | — | |
| Palantir Technologies Inc. | 0.07 | 0.08 | — | — | — | |
| Palo Alto Networks Inc. | 0.33 | 0.35 | — | — | — | |
| Salesforce Inc. | 0.15 | 0.10 | — | — | — | |
| ServiceNow Inc. | 0.17 | 0.21 | — | — | — | |
| Synopsys Inc. | 0.07 | 0.08 | 0.08 | — | — | |
| Workday Inc. | 0.20 | 0.26 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Software & Services | 0.30 | 0.32 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Information Technology | 0.29 | 0.31 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 11,555 ÷ 78,717 = 0.15
2 Click competitor name to see calculations.
The analysis of solvency metrics from 2018 to 2022 indicates a consistent increase in both total obligations and the overall asset base, resulting in a gradual rise in the debt-to-assets ratio. While the company has expanded its balance sheet significantly, the growth in total debt has outpaced the growth in assets over the five-year period.
- Total Debt Expansion
- Total debt, including operating lease liabilities, exhibited a sharp upward trajectory, rising from US$ 1,998 million in 2018 to US$ 11,555 million by the end of 2022. The most pronounced increase occurred between 2019 and 2020, where debt nearly doubled from US$ 5,472 million to US$ 9,725 million.
- Asset Growth Trends
- Total assets grew steadily throughout the period, increasing from US$ 43,332 million in 2018 to US$ 78,717 million in 2022. This growth reflects a substantial expansion of the company's resource base, although the pace of asset accumulation was more linear compared to the volatility seen in debt procurement.
- Debt to Assets Ratio Analysis
- The debt-to-assets ratio rose from 0.05 in 2018 to 0.15 in 2022. A period of rapid escalation was observed between 2018 and 2020, with the ratio moving from 0.05 to 0.14. A slight stabilization occurred in 2021 with a minor decrease to 0.13, before the ratio reached its peak of 0.15 in 2022. This trend suggests an increasing reliance on leveraged financing to support growth, although the absolute ratio remains relatively low, indicating a stable solvency position.
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Financial Leverage
PayPal Holdings Inc., financial leverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 78,717) | 75,803) | 70,379) | 51,333) | 43,332) | |
| Total PayPal stockholders’ equity | 20,274) | 21,727) | 20,019) | 16,885) | 15,386) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 3.88 | 3.49 | 3.52 | 3.04 | 2.82 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Accenture PLC | 2.14 | 2.21 | 2.18 | — | — | |
| Adobe Inc. | 1.93 | 1.84 | 1.83 | — | — | |
| AppLovin Corp. | 3.07 | 2.88 | — | — | — | |
| Cadence Design Systems Inc. | 1.87 | 1.60 | — | — | — | |
| Datadog Inc. | 2.13 | 2.29 | — | — | — | |
| International Business Machines Corp. | 5.80 | 6.98 | — | — | — | |
| Intuit Inc. | 1.69 | 1.57 | — | — | — | |
| Microsoft Corp. | 2.19 | 2.35 | — | — | — | |
| Oracle Corp. | — | 25.03 | — | — | — | |
| Palantir Technologies Inc. | 1.35 | 1.42 | — | — | — | |
| Palo Alto Networks Inc. | 58.35 | 16.14 | — | — | — | |
| Salesforce Inc. | 1.64 | 1.60 | — | — | — | |
| ServiceNow Inc. | 2.64 | 2.92 | — | — | — | |
| Synopsys Inc. | 1.71 | 1.65 | 1.64 | — | — | |
| Workday Inc. | 2.31 | 2.66 | — | — | — | |
| Financial Leverage, Sector | ||||||
| Software & Services | 2.72 | 2.95 | — | — | — | |
| Financial Leverage, Industry | ||||||
| Information Technology | 2.65 | 2.87 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Financial leverage = Total assets ÷ Total PayPal stockholders’ equity
= 78,717 ÷ 20,274 = 3.88
2 Click competitor name to see calculations.
An upward trajectory in both total assets and financial leverage is observed over the five-year period ending December 31, 2022. While the asset base expanded consistently, the growth in stockholders' equity lagged behind, resulting in an increased reliance on liabilities to fund organizational growth.
- Total Asset Expansion
- Total assets grew from US$ 43,332 million in 2018 to US$ 78,717 million in 2022. The most significant acceleration in asset growth occurred between 2019 and 2020, where assets increased by approximately 37% in a single fiscal year.
- Stockholders' Equity Trends
- Equity experienced a steady increase from US$ 15,386 million in 2018 to a peak of US$ 21,727 million in 2021. However, a reversal occurred in 2022, with equity declining to US$ 20,274 million, marking the first decrease in the observed period.
- Financial Leverage Analysis
- The financial leverage ratio increased from 2.82 in 2018 to 3.88 in 2022. This progression indicates a structural shift toward higher leverage. The ratio peaked in 2022, driven by the combination of continued asset growth and a simultaneous contraction in stockholders' equity.
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Interest Coverage
PayPal Holdings Inc., interest coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 2,419) | 4,169) | 4,202) | 2,459) | 2,057) | |
| Add: Income tax expense | 947) | (70) | 863) | 539) | 319) | |
| Add: Interest expense | 304) | 232) | 209) | 115) | 77) | |
| Earnings before interest and tax (EBIT) | 3,670) | 4,331) | 5,274) | 3,113) | 2,453) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 12.07 | 18.67 | 25.23 | 27.07 | 31.86 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Accenture PLC | 195.34 | 131.46 | 205.84 | — | — | |
| Adobe Inc. | 54.64 | 51.49 | 37.00 | — | — | |
| AppLovin Corp. | -0.19 | 1.45 | — | — | — | |
| Cadence Design Systems Inc. | 46.58 | 46.26 | — | — | — | |
| Datadog Inc. | -1.30 | 0.12 | — | — | — | |
| International Business Machines Corp. | 1.97 | 5.20 | — | — | — | |
| Intuit Inc. | 32.38 | 89.14 | — | — | — | |
| Microsoft Corp. | 41.58 | 31.31 | — | — | — | |
| Oracle Corp. | 3.84 | 6.28 | — | — | — | |
| Palantir Technologies Inc. | -87.97 | -133.20 | — | — | — | |
| Palo Alto Networks Inc. | -6.56 | -1.85 | — | — | — | |
| Salesforce Inc. | 7.93 | 21.49 | — | — | — | |
| ServiceNow Inc. | 15.78 | 9.89 | — | — | — | |
| Synopsys Inc. | 657.96 | 240.38 | 125.16 | — | — | |
| Workday Inc. | 1.97 | -3.00 | — | — | — | |
| Interest Coverage, Sector | ||||||
| Software & Services | 17.77 | 17.09 | — | — | — | |
| Interest Coverage, Industry | ||||||
| Information Technology | 22.18 | 19.66 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Interest coverage = EBIT ÷ Interest expense
= 3,670 ÷ 304 = 12.07
2 Click competitor name to see calculations.
An analysis of the solvency metrics from 2018 to 2022 reveals a consistent decline in the capacity to cover interest obligations, characterized by a divergent trend between operating profitability and financing costs.
- Earnings Before Interest and Tax (EBIT)
- Operating earnings exhibited significant volatility during the period. A strong growth phase was observed from 2018 to 2020, with EBIT increasing from US$ 2,453 million to a peak of US$ 5,274 million. However, this trend reversed after 2020, with earnings declining to US$ 3,670 million by the end of 2022, representing a contraction in operating profitability over the final two years of the sequence.
- Interest Expense
- Financing costs demonstrated a continuous and linear upward trajectory. Interest expenses rose steadily from US$ 77 million in 2018 to US$ 304 million in 2022. This consistent increase suggests an expansion of the debt load or an escalation in the cost of borrowing over the five-year period.
- Interest Coverage Ratio
- The interest coverage ratio experienced a persistent downward trend, falling from 31.86 in 2018 to 12.07 in 2022. While the company maintained a substantial margin of safety throughout the period, the ratio decreased annually. The most pronounced deterioration occurred between 2020 and 2022, driven by the simultaneous decline in EBIT and the continued rise in interest expenses. This convergence indicates a reduction in the relative cushion available to meet interest payments from operating profits.
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Fixed Charge Coverage
PayPal Holdings Inc., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 2,419) | 4,169) | 4,202) | 2,459) | 2,057) | |
| Add: Income tax expense | 947) | (70) | 863) | 539) | 319) | |
| Add: Interest expense | 304) | 232) | 209) | 115) | 77) | |
| Earnings before interest and tax (EBIT) | 3,670) | 4,331) | 5,274) | 3,113) | 2,453) | |
| Add: Operating lease expense | 171) | 170) | 166) | 136) | 94) | |
| Earnings before fixed charges and tax | 3,841) | 4,501) | 5,440) | 3,249) | 2,547) | |
| Interest expense | 304) | 232) | 209) | 115) | 77) | |
| Operating lease expense | 171) | 170) | 166) | 136) | 94) | |
| Fixed charges | 475) | 402) | 375) | 251) | 171) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 8.09 | 11.20 | 14.51 | 12.94 | 14.89 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Accenture PLC | 12.25 | 10.41 | 9.66 | — | — | |
| Adobe Inc. | 26.79 | 25.59 | 18.77 | — | — | |
| AppLovin Corp. | -0.07 | 1.35 | — | — | — | |
| Cadence Design Systems Inc. | 15.50 | 13.77 | — | — | — | |
| Datadog Inc. | 0.09 | 0.55 | — | — | — | |
| International Business Machines Corp. | 1.52 | 3.13 | — | — | — | |
| Intuit Inc. | 14.67 | 25.58 | — | — | — | |
| Microsoft Corp. | 19.50 | 16.90 | — | — | — | |
| Oracle Corp. | 3.22 | 5.17 | — | — | — | |
| Palantir Technologies Inc. | -5.06 | -7.89 | — | — | — | |
| Palo Alto Networks Inc. | -1.18 | -1.09 | — | — | — | |
| Salesforce Inc. | 2.18 | 2.92 | — | — | — | |
| ServiceNow Inc. | 3.87 | 2.95 | — | — | — | |
| Synopsys Inc. | 12.91 | 9.29 | 7.46 | — | — | |
| Workday Inc. | 1.15 | -0.69 | — | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Software & Services | 9.33 | 9.14 | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Information Technology | 13.23 | 12.08 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 3,841 ÷ 475 = 8.09
2 Click competitor name to see calculations.
The financial data indicates a deteriorating trend in the fixed charge coverage ratio over the five-year period from 2018 to 2022. While the capacity to service fixed obligations remains sufficient, the safety margin has contracted significantly due to a combination of rising costs and declining earnings in recent years.
- Earnings Before Fixed Charges and Tax
- Earnings exhibited a non-linear trajectory, increasing from 2,547 million US$ in 2018 to a peak of 5,440 million US$ in 2020. Following this peak, a downward trend emerged, with earnings falling to 4,501 million US$ in 2021 and further declining to 3,841 million US$ by the end of 2022.
- Fixed Charges
- Fixed obligations have demonstrated a consistent and uninterrupted annual increase. These charges grew from 171 million US$ in 2018 to 475 million US$ in 2022, representing a substantial increase in the total fixed financial burden over the analyzed period.
- Fixed Charge Coverage Ratio
- The coverage ratio decreased from 14.89 in 2018 to 8.09 in 2022. Although a temporary recovery to 14.51 was recorded in 2020, the ratio has since declined sharply. This compression is the result of the divergence between steadily rising fixed charges and the post-2020 contraction in earnings before fixed charges and tax.
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