Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
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- Cash Flow Statement
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- Analysis of Debt
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Solvency Ratios (Summary)
Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
---|---|---|---|---|---|---|
Debt Ratios | ||||||
Debt to equity | ||||||
Debt to capital | ||||||
Debt to assets | ||||||
Financial leverage | ||||||
Coverage Ratios | ||||||
Interest coverage | ||||||
Fixed charge coverage |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
The financial data reveals several notable trends in the company's capital structure, leverage, and coverage ratios over the five-year period from 2014 to 2018.
- Debt to Equity Ratio
- This ratio shows a rising trend, increasing from 0.38 in 2014 to 1.47 in 2018. The gradual increase indicates that the company relied increasingly on debt financing relative to its equity, nearly quadrupling this ratio over the period. This suggests a shift toward greater leverage.
- Debt to Capital Ratio
- The ratio also increased steadily from 0.28 in 2014 to 0.60 in 2018. This aligns with the debt to equity ratio trend and indicates that debt made up a larger portion of the total capital structure over time, reinforcing the observation of increased leverage.
- Debt to Assets Ratio
- The debt to assets ratio grew from 0.17 in 2014 to 0.40 in 2018. This upward movement signifies a growing proportion of the company's assets being financed through debt. The relatively consistent increase points to a deliberate strategy or necessity to use more debt financing against assets.
- Financial Leverage Ratio
- The financial leverage ratio experienced variability but overall increased significantly from 2.27 in 2014 to 3.63 in 2018, peaking notably in 2017 at 3.22 before further rising in 2018. This measure confirms that equity investors' exposure to assets funded by debt has intensified.
- Interest Coverage Ratio
- The interest coverage ratio declined markedly from an extremely high 29.71 in 2014 to 9.34 in 2018, with a low point of 8.79 in 2017. Although still above 1 (indicating ability to cover interest expenses), the sharp reduction signals decreased earnings buffer to meet interest obligations, potentially reflecting increased interest expense or reduced operating income.
- Fixed Charge Coverage Ratio
- This ratio follows a similar declining trend, falling from 13.52 in 2014 to 7.12 in 2018. The decreasing coverage suggests that the company's capacity to cover fixed financial charges, including interest and lease expenses, has diminished over the period, albeit it remains at a moderate level.
In summary, the data indicates an increasing reliance on debt financing from 2014 to 2018, with leverage ratios rising consistently. Concurrently, coverage ratios for interest and fixed charges have weakened substantially, though they remain at levels that suggest the company can currently meet its obligations. The overall pattern points to a more leveraged financial structure accompanied by a reduced margin of safety for debt servicing capacity over time.
Debt Ratios
Coverage Ratios
Debt to Equity
Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Short-term debt | ||||||
Long-term debt | ||||||
Total debt | ||||||
Stockholders’ equity | ||||||
Solvency Ratio | ||||||
Debt to equity1 | ||||||
Benchmarks | ||||||
Debt to Equity, Competitors2 | ||||||
Amazon.com Inc. | ||||||
Home Depot Inc. | ||||||
Lowe’s Cos. Inc. | ||||||
TJX Cos. Inc. |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Debt to equity = Total debt ÷ Stockholders’ equity
= ÷ =
2 Click competitor name to see calculations.
- Total Debt
- The total debt exhibited fluctuations over the observed period. It decreased from 7,627 million USD at the end of 2014 to 6,779 million USD by the end of 2015. Following this, there was an increase in debt in 2016 reaching 8,960 million USD, continuing to rise to 10,015 million USD in 2017, before slightly declining to 9,231 million USD in 2018. This pattern indicates periods of both debt reduction and accumulation, with a peak occurring in 2017.
- Stockholders’ Equity
- Stockholders’ equity showed a substantial decline over the five-year period. Starting at 19,906 million USD in 2014, it sharply dropped to 6,576 million USD in 2015. Although there was a partial recovery in 2016 to 10,539 million USD, equity continued to decrease thereafter, reaching 8,063 million USD in 2017 and further falling to 6,281 million USD by 2018. This trend suggests significant erosion of equity capital during these years, with only a temporary improvement in 2016.
- Debt to Equity Ratio
- The debt to equity ratio rose markedly from 0.38 at the end of 2014 to 1.03 in 2015, indicating a substantial increase in leverage relative to equity. Although it improved slightly to 0.85 in 2016, the ratio increased again to 1.24 in 2017 and further to 1.47 in 2018. This trend demonstrates increasing reliance on debt financing compared to equity, potentially reflecting higher financial risk and reduced equity cushion over time.
Debt to Capital
Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Short-term debt | ||||||
Long-term debt | ||||||
Total debt | ||||||
Stockholders’ equity | ||||||
Total capital | ||||||
Solvency Ratio | ||||||
Debt to capital1 | ||||||
Benchmarks | ||||||
Debt to Capital, Competitors2 | ||||||
Amazon.com Inc. | ||||||
Home Depot Inc. | ||||||
Lowe’s Cos. Inc. | ||||||
TJX Cos. Inc. |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Debt to capital = Total debt ÷ Total capital
= ÷ =
2 Click competitor name to see calculations.
- Total debt
- The total debt exhibited a fluctuating pattern over the reported periods. Starting at 7,627 million USD in 2014, it decreased to 6,779 million USD in 2015, then increased significantly to 8,960 million USD in 2016. This upward trend continued in 2017, reaching 10,015 million USD, followed by a slight reduction to 9,231 million USD in 2018. Overall, the total debt shows a net increase across the five years.
- Total capital
- Total capital demonstrated considerable volatility during the period. It initially decreased sharply from 27,533 million USD in 2014 to 13,355 million USD in 2015, representing more than a 50% drop. Subsequently, total capital increased to 19,499 million USD in 2016. After this peak, it declined again in both 2017 and 2018, reaching 18,078 million USD and 15,512 million USD respectively. The trend indicates a substantial contraction in capital since the starting point, with some recovery and fluctuations in the middle years.
- Debt to capital ratio
- The debt to capital ratio increased markedly over the observed timeline. It started at 0.28 in 2014, rising sharply to 0.51 in 2015. Despite a slight reduction to 0.46 in 2016, the ratio again climbed to 0.55 in 2017 and reached its highest level at 0.6 in 2018. This upward trajectory suggests a growing reliance on debt financing relative to total capital, indicating an increase in financial leverage and potentially higher financial risk.
Debt to Assets
Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Short-term debt | ||||||
Long-term debt | ||||||
Total debt | ||||||
Total assets | ||||||
Solvency Ratio | ||||||
Debt to assets1 | ||||||
Benchmarks | ||||||
Debt to Assets, Competitors2 | ||||||
Amazon.com Inc. | ||||||
Home Depot Inc. | ||||||
Lowe’s Cos. Inc. | ||||||
TJX Cos. Inc. |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Debt to assets = Total debt ÷ Total assets
= ÷ =
2 Click competitor name to see calculations.
- Total Debt
- The total debt displayed variability over the analyzed period. Starting at 7,627 million US dollars at the end of 2014, it decreased to 6,779 million in 2015. Subsequently, it increased significantly to 8,960 million in 2016, followed by a further increase to 10,015 million in 2017. In 2018, total debt slightly decreased to 9,231 million. This pattern indicates fluctuations with an overall upward trend in debt levels over the five-year span.
- Total Assets
- Total assets experienced a sharp decline from 45,132 million US dollars at the end of 2014 to 17,785 million in 2015. After this significant drop, assets demonstrated a recovery trend by increasing to 23,847 million in 2016 and further to 25,981 million in 2017. However, in 2018 total assets decreased again to 22,819 million. The data reveals a steep initial decrease followed by partial recovery and a slight downturn in the final year.
- Debt to Assets Ratio
- The debt to assets ratio showed a noticeable increase during the period. It rose from 0.17 in 2014 to 0.38 in 2015 and remained relatively stable around 0.38 to 0.40 from 2016 through 2018. This indicates that while total debt levels increased marginally, total assets decreased sharply in the early period, leading to a substantially higher proportion of debt relative to assets. The ratio's stabilization towards the end suggests a balance between debt and asset levels was achieved in the later years.
Financial Leverage
Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Total assets | ||||||
Stockholders’ equity | ||||||
Solvency Ratio | ||||||
Financial leverage1 | ||||||
Benchmarks | ||||||
Financial Leverage, Competitors2 | ||||||
Amazon.com Inc. | ||||||
Home Depot Inc. | ||||||
Lowe’s Cos. Inc. | ||||||
TJX Cos. Inc. |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Financial leverage = Total assets ÷ Stockholders’ equity
= ÷ =
2 Click competitor name to see calculations.
The financial data shows notable fluctuations in total assets and stockholders' equity over the five-year period, along with varying financial leverage ratios.
- Total Assets
- The total assets experienced a sharp decline from 45,132 million US dollars at the end of 2014 to 17,785 million US dollars by the end of 2015. After this significant drop, there was a gradual recovery with assets rising to 23,847 million in 2016 and further increasing to 25,981 million in 2017. However, in 2018, total assets decreased again to 22,819 million US dollars. Overall, the asset base shows volatility with a substantial decrease in the initial year followed by partial recovery and a slight decline thereafter.
- Stockholders' Equity
- Stockholders' equity mirrors the downward trend observed in total assets but with a proportional reduction in magnitude. Equity dropped from 19,906 million US dollars in 2014 to 6,576 million in 2015, representing a substantial decline. It increased moderately to 10,539 million in 2016 but then declined again to 8,063 million in 2017 and further to 6,281 million in 2018. This pattern indicates shrinking equity capital with intermittent partial recoveries.
- Financial Leverage
- Financial leverage, defined as the ratio of total assets to stockholders' equity, presents an increasing trend over the period. Starting at 2.27 in 2014, it rose to 2.7 in 2015 despite the decrease in both assets and equity. It decreased slightly to 2.26 in 2016 but then sharply increased to 3.22 in 2017 and further to 3.63 in 2018. This rising leverage suggests an increasing reliance on debt or other non-equity financing relative to shareholders' equity over time.
In summary, the data indicates a significant restructuring or devaluation of asset and equity bases around 2015, followed by fluctuating but generally reduced levels of both assets and equity. Concurrently, financial leverage has increased substantially, implying greater financial risk exposure and potentially more aggressive financing strategies in recent years.
Interest Coverage
Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Net income (loss) | ||||||
Less: Income (loss) from discontinued operations, net of income taxes | ||||||
Add: Income tax expense | ||||||
Add: Interest expense | ||||||
Earnings before interest and tax (EBIT) | ||||||
Solvency Ratio | ||||||
Interest coverage1 | ||||||
Benchmarks | ||||||
Interest Coverage, Competitors2 | ||||||
Amazon.com Inc. | ||||||
Home Depot Inc. | ||||||
Lowe’s Cos. Inc. | ||||||
TJX Cos. Inc. |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Interest coverage = EBIT ÷ Interest expense
= ÷ =
2 Click competitor name to see calculations.
The financial data for the periods ending December 31, 2014, through December 31, 2018, reveals several notable trends in earnings before interest and tax (EBIT), interest expense, and interest coverage ratio.
- Earnings Before Interest and Tax (EBIT)
- The EBIT showed variability over the five-year span. It started at 3,654 million US dollars in 2014, decreased significantly to 2,550 million in 2015, then surged to 3,876 million in 2016. Following this peak, EBIT declined again to 2,568 million in 2017 before moderately increasing to 3,044 million in 2018. These fluctuations indicate a lack of consistent growth in operating profit during the period analyzed.
- Interest Expense
- Interest expense on debt increased steadily each year. It rose from 123 million US dollars in 2014 to 326 million in 2018, more than doubling over the five years. This steady increase suggests a growing debt burden or higher interest rates impacting financing costs.
- Interest Coverage Ratio
- The interest coverage ratio, measuring the ability to meet interest obligations from EBIT, demonstrated a declining trend from 29.71 times in 2014 to 9.34 times in 2018. This decline reflects both the decreasing EBIT in some years and the rising interest expense, indicating reduced cushion to cover interest payments. The sharpest drops occurred between 2014 and 2017, stabilizing somewhat in 2018 but remaining substantially lower than the initial year.
Overall, the trends highlight concerns regarding profitability stability and increasing financing costs, which may warrant attention to debt management and operational efficiency to improve financial resilience.
Fixed Charge Coverage
Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Net income (loss) | ||||||
Less: Income (loss) from discontinued operations, net of income taxes | ||||||
Add: Income tax expense | ||||||
Add: Interest expense | ||||||
Earnings before interest and tax (EBIT) | ||||||
Add: Rent expense | ||||||
Earnings before fixed charges and tax | ||||||
Interest expense | ||||||
Rent expense | ||||||
Fixed charges | ||||||
Solvency Ratio | ||||||
Fixed charge coverage1 | ||||||
Benchmarks | ||||||
Fixed Charge Coverage, Competitors2 | ||||||
Amazon.com Inc. | ||||||
Home Depot Inc. | ||||||
Lowe’s Cos. Inc. | ||||||
TJX Cos. Inc. |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= ÷ =
2 Click competitor name to see calculations.
The financial data indicates fluctuations in earnings before fixed charges and tax over the five-year period. The value decreased from 3,813 million USD in 2014 to 2,629 million USD in 2015, then rose significantly to 3,960 million USD in 2016. This was followed by another decline to 2,673 million USD in 2017, with a partial recovery to 3,162 million USD in 2018. This pattern suggests variability in operating performance or other factors affecting earnings.
Fixed charges exhibited a generally upward trend throughout the period. Starting at 282 million USD in 2014, fixed charges decreased to 223 million USD in 2015 but then steadily increased to 309 million USD in 2016, 397 million USD in 2017, and 444 million USD in 2018. The increasing fixed charges over the latter years may reflect higher interest expenses or other fixed financial obligations.
The fixed charge coverage ratio, which measures the ability to cover fixed charges with earnings before fixed charges and tax, shows a decreasing trend with some volatility. The ratio was highest in 2014 at 13.52, decreased slightly to 11.79 in 2015, increased to 12.82 in 2016, and then dropped significantly to 6.73 in 2017. In 2018, a minor improvement to 7.12 was observed but the coverage remained substantially lower than in the earlier years. This decline indicates a reduced capacity to cover fixed financial obligations from earnings, reflecting potentially increased risk or tighter financial conditions.
Overall, the data reveals fluctuating operational earnings, increasing fixed charges, and a notable downward trend in fixed charge coverage, signaling challenges in maintaining earnings adequacy relative to fixed financial commitments during the latter part of the period analyzed.