Texas Instruments Inc. (NASDAQ:TXN)

Over the five-year period examined, solvency ratios indicate a consistent increase in financial leverage alongside a declining ability to meet fixed and interest obligations. The company demonstrates a growing reliance on debt financing, as evidenced by increases across multiple debt-related metrics. However, the capacity to comfortably service this debt appears to be diminishing.

Debt Levels

Debt to equity, both with and without the inclusion of operating lease liabilities, exhibits a steady upward trend, increasing from 0.58 and 0.62 in 2021 to 0.86 and 0.91 in 2025, respectively. Similarly, debt to capital ratios, including and excluding operating lease liabilities, rise from 0.37 and 0.38 to 0.46 and 0.48 over the same period. Debt to assets ratios also follow this pattern, moving from 0.31 and 0.33 to 0.41 and 0.43. These increases suggest a growing proportion of the company’s financing is derived from debt.

Leverage

Financial leverage, which measures the extent to which a company uses debt to finance its assets, increases from 1.85 in 2021 to 2.13 in 2025. This confirms the increasing reliance on debt financing and indicates a higher degree of financial risk.

Coverage Ratios

A significant downward trend is observed in both interest coverage and fixed charge coverage ratios. Interest coverage declines substantially from 49.47 in 2021 to 11.52 in 2025, while fixed charge coverage decreases from 36.25 to 9.85 over the same timeframe. This indicates a weakening ability to meet interest and fixed financing obligations from operating earnings. While the ratios remain above one, suggesting the company can currently cover its obligations, the rate of decline warrants attention.

In summary, the observed trends suggest a shift towards greater financial leverage coupled with a decreasing margin of safety in terms of debt service coverage. Continued monitoring of these ratios is recommended to assess the sustainability of the company’s capital structure.

The debt to equity ratio exhibits a consistent upward trend over the five-year period. This indicates a growing reliance on debt financing relative to equity financing.

Debt to Equity Ratio Trend

In 2021, the debt to equity ratio stood at 0.58. It increased to 0.60 in 2022, representing a modest rise in financial leverage. The ratio continued to climb, reaching 0.66 in 2023. A more substantial increase was observed between 2023 and 2024, with the ratio reaching 0.80. This trend persisted into 2025, with the ratio further increasing to 0.86.

The increase in the debt to equity ratio suggests that the company is financing a greater proportion of its assets with debt. While utilizing debt can amplify returns, it also elevates financial risk. The consistent upward movement warrants further investigation into the reasons behind the increased debt levels and the company’s ability to service its debt obligations.

Total Debt and Stockholders’ Equity

Total debt increased steadily throughout the period, rising from US$7,741 million in 2021 to US$14,048 million in 2025. Stockholders’ equity also increased initially, from US$13,333 million in 2021 to US$16,903 million in 2024, but experienced a slight decrease to US$16,273 million in 2025. The combination of increasing debt and a plateauing, then slightly declining, equity base contributed to the observed increase in the debt to equity ratio.

The relatively rapid increase in the ratio during the latter part of the period (2023-2025) may indicate a shift in the company’s capital structure strategy or a need for significant capital investment funded through borrowing.

The debt to equity ratio, including operating lease liability, demonstrates a clear increasing trend over the five-year period. Total debt has risen consistently, while stockholders’ equity has exhibited more moderate growth, ultimately contributing to a higher ratio.

Debt to Equity Ratio Trend

In 2021, the debt to equity ratio was 0.62. This increased to 0.63 in 2022, indicating a slight rise in leverage. The ratio continued to climb, reaching 0.70 in 2023. A more substantial increase was observed in 2024, with the ratio reaching 0.85. This upward trend culminated in a ratio of 0.91 in 2025, representing the highest level of leverage within the observed period.

Total debt, inclusive of operating lease liabilities, increased from US$8,206 million in 2021 to US$14,779 million in 2025. This represents a significant absolute increase of US$6,573 million over the five years. The rate of increase in debt appears to have accelerated between 2023 and 2024.

Stockholders’ Equity

Stockholders’ equity grew from US$13,333 million in 2021 to US$16,273 million in 2025. While positive, the growth in equity was less pronounced than the increase in debt. Equity growth was relatively consistent between 2021 and 2023, but showed minimal change between 2023 and 2024, and a slight decrease in 2025.

The combined effect of increasing debt and relatively slower equity growth has resulted in a progressively higher debt to equity ratio. This suggests a greater reliance on debt financing over time. The increasing ratio warrants further investigation into the company’s debt structure, interest coverage, and overall financial health.

The debt to capital ratio for the analyzed period demonstrates a consistent upward trend. Initially, the ratio remained stable, then increased over the subsequent years, indicating a growing reliance on debt financing relative to total capital.

Total Debt

Total debt exhibited a steady increase throughout the period, rising from US$7,741 million in 2021 to US$14,048 million in 2025. The rate of increase appeared to accelerate between 2022 and 2024.

Total Capital

Total capital also increased over the period, moving from US$21,074 million in 2021 to US$30,321 million in 2025. However, the growth rate of total capital was less pronounced than that of total debt, particularly in the later years of the period.

Debt to Capital Ratio

The debt to capital ratio began at 0.37 in both 2021 and 2022, signifying that 37% of the company’s capital was financed by debt. The ratio increased to 0.40 in 2023, then to 0.45 in 2024, and finally reached 0.46 in 2025. This progression suggests an increasing proportion of debt financing within the company’s capital structure. The increase indicates a potentially higher level of financial risk, as the company is becoming more leveraged.

The consistent rise in the debt to capital ratio warrants further investigation into the reasons behind the increased debt levels and the company’s ability to service this debt. While increased debt can fuel growth, a sustained upward trend requires careful monitoring to ensure financial stability.

The debt to capital ratio, inclusive of operating lease liabilities, exhibits a consistent upward trend over the five-year period. This indicates a growing reliance on debt financing relative to the company’s total capital structure.

Total Debt (including operating lease liability)

Total debt has increased steadily from US$8,206 million in 2021 to US$14,779 million in 2025. The most significant increase occurred between 2022 and 2023, and again between 2023 and 2024. The rate of increase slowed between 2024 and 2025.

Total Capital (including operating lease liability)

Total capital also increased over the period, moving from US$21,539 million in 2021 to US$31,052 million in 2025. While capital increased each year, the growth rate was not consistent, with a larger increase observed between 2022 and 2023, and a smaller increase between 2024 and 2025.

Debt to Capital Ratio

The debt to capital ratio rose from 0.38 in 2021 to 0.48 in 2025. This represents a 26.3% increase over the five-year period. The ratio increased from 0.38 to 0.39 between 2021 and 2022, then to 0.41 in 2023, 0.46 in 2024, and finally to 0.48 in 2025. The accelerating increase in the ratio suggests a growing proportion of financing is derived from debt sources.

The observed trend suggests the company is increasingly leveraging debt to fund its operations and growth. While not inherently negative, continued increases in this ratio warrant further investigation into the company’s ability to service its debt obligations and the strategic rationale behind the increased borrowing.

The debt-to-assets ratio for the analyzed period demonstrates a consistent upward trend. This indicates an increasing reliance on debt financing relative to the company’s total asset base over the five-year period.

Debt to Assets Ratio Trend

In 2021, the debt-to-assets ratio stood at 0.31. This ratio increased to 0.32 in 2022, representing a modest initial increase in leverage. The rate of increase accelerated in subsequent years, reaching 0.35 in 2023 and further climbing to 0.38 in 2024. By 2025, the ratio reached 0.41, signifying the highest level of debt relative to assets within the observed timeframe.

The consistent increase in the debt-to-assets ratio suggests a strategic shift towards greater financial leverage. While increased leverage can amplify returns on equity, it also elevates financial risk. The company’s ability to service its debt obligations and maintain financial flexibility should be monitored closely given this trend.

Magnitude of Change

The overall change in the debt-to-assets ratio from 2021 to 2025 is approximately 10 percentage points (0.10). The largest single-year increase occurred between 2023 and 2024, with a change of 3 percentage points (0.03). This suggests a potentially more aggressive debt financing strategy was employed during that period.

Continued monitoring of this ratio, alongside other solvency and profitability metrics, is recommended to assess the sustainability of the company’s financial structure and its capacity to manage increasing debt levels.

The debt to assets ratio, including operating lease liability, exhibits a consistent upward trend over the five-year period. Total debt has increased from US$8.206 billion in 2021 to US$14.779 billion in 2025, while total assets have grown from US$24.676 billion to US$34.585 billion over the same timeframe. The increasing ratio indicates a growing reliance on debt financing relative to the company’s asset base.

Debt to Assets Ratio Trend

The ratio increased steadily from 0.33 in 2021 to 0.43 in 2025. This represents a 30.3% increase over the period. The most significant increase occurred between 2022 and 2023 (0.34 to 0.36) and again between 2023 and 2024 (0.36 to 0.40), suggesting accelerated debt accumulation relative to asset growth during those years.

While total assets have increased in absolute terms, the rate of asset growth appears to be slower than the rate of debt accumulation, particularly in the later years of the period. This is evidenced by the accelerating increase in the debt to assets ratio. The ratio reaching 0.43 in 2025 suggests that approximately 43% of the company’s assets are financed by debt. Further investigation into the specific uses of the debt and the returns generated from those investments would be necessary to assess the sustainability of this trend.

Debt and Asset Values

Total debt increased by US$6.573 billion between 2021 and 2025. Total assets increased by US$9.909 billion over the same period. The larger absolute increase in assets compared to debt suggests the company is still growing, but the increasing ratio indicates a shift in the capital structure towards greater leverage.

The continued increase in the debt to assets ratio warrants monitoring. While not necessarily indicative of financial distress, a consistently rising ratio could signal increased financial risk and potentially limit future financial flexibility.

An examination of the provided financial information reveals a consistent increase in financial leverage over the five-year period from 2021 to 2025. Total assets have generally increased, while stockholders’ equity has experienced more moderate growth, contributing to this trend. The following details provide a more granular view of these observations.

Total Assets

Total assets increased from US$24,676 million in 2021 to US$35,509 million in 2024, representing substantial growth. A slight decrease to US$34,585 million is observed in 2025, but the asset base remains significantly higher than in 2021.

Stockholders’ Equity

Stockholders’ equity demonstrated growth from US$13,333 million in 2021 to US$16,903 million in 2024. However, equity decreased slightly to US$16,273 million in 2025. The rate of growth in equity has been slower than the growth in total assets.

Financial Leverage

The financial leverage ratio has steadily increased from 1.85 in 2021 to 2.13 in 2025. This indicates a growing reliance on debt financing relative to equity. The increase from 1.87 in 2022 to 1.91 in 2023 was modest, but the ratio accelerated to 2.10 in 2024 before reaching 2.13 in 2025. This suggests an increasing proportion of assets are financed by debt.

The observed trend in financial leverage suggests the company is increasingly utilizing debt to finance its asset growth. While not inherently negative, continued increases in this ratio warrant monitoring to assess potential risks associated with higher debt levels, such as increased interest expense and financial risk.

The interest coverage ratio demonstrates a significant declining trend over the observed five-year period. While initially strong, the ability to meet interest obligations from earnings has diminished considerably.

Earnings Before Interest and Tax (EBIT)

EBIT increased from US$9,103 million in 2021 to US$10,246 million in 2022, representing a growth of approximately 12.5%. However, subsequent years show a marked decrease, falling to US$7,771 million in 2023, US$5,961 million in 2024, and stabilizing slightly at US$6,253 million in 2025. This indicates a weakening operational profitability.

Interest and Debt Expense

Interest and debt expense exhibited a consistent upward trajectory throughout the period. Starting at US$184 million in 2021, it rose to US$214 million in 2022, then increased more substantially to US$353 million in 2023, US$508 million in 2024, and finally reached US$543 million in 2025. This suggests increasing borrowing costs or a higher level of debt.

Interest Coverage Ratio

The interest coverage ratio began at a robust 49.47 in 2021 and remained high at 47.88 in 2022. A substantial decline commenced in 2023, with the ratio falling to 22.01. This downward trend continued, reaching 11.73 in 2024 and stabilizing at 11.52 in 2025. While still above one, indicating the ability to cover interest expenses, the ratio’s reduction signals a considerably weakened capacity to do so compared to earlier years. The convergence of decreasing EBIT and increasing interest expense is the primary driver of this decline.

The observed trends suggest a growing vulnerability to changes in interest rates or declines in operational performance. Continued monitoring of these ratios is recommended to assess the long-term sustainability of debt obligations.

The company demonstrates a declining ability to cover its fixed charges over the five-year period. While initially strong, the fixed charge coverage ratio exhibits a significant downward trend, warranting further investigation.

Earnings Before Fixed Charges and Tax

Earnings before fixed charges and tax increased from US$9,172 million in 2021 to US$10,313 million in 2022, representing a growth of approximately 12.5%. However, subsequent years show a marked decline, falling to US$7,844 million in 2023, US$6,046 million in 2024, and stabilizing at US$6,355 million in 2025. This decreasing trend in earnings is a primary driver of the observed changes in fixed charge coverage.

Fixed Charges

Fixed charges experienced a consistent increase throughout the period. Starting at US$253 million in 2021, they rose to US$281 million in 2022, US$426 million in 2023, US$593 million in 2024, and further to US$645 million in 2025. This continuous increase in fixed obligations contributes to the declining coverage ratio.

Fixed Charge Coverage

The fixed charge coverage ratio began at a high of 36.25 in 2021 and 36.70 in 2022, indicating a substantial capacity to meet fixed obligations. However, the ratio decreased substantially to 18.41 in 2023, then to 10.20 in 2024, and settled at 9.85 in 2025. This represents a significant deterioration in the company’s ability to comfortably cover its fixed charges with its earnings. While the ratio remains above 1.0, suggesting the company can currently meet its obligations, the steep decline is a cause for concern and requires monitoring.

The combination of decreasing earnings before fixed charges and tax and increasing fixed charges has resulted in a substantial reduction in the fixed charge coverage ratio. The trend suggests increasing financial risk and a potentially diminished capacity to absorb adverse economic conditions or unexpected expenses.