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)
Air Products & Chemicals Inc., solvency ratios
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
The solvency profile of the organization exhibited a notable fluctuation between 2015 and 2020, characterized by a period of significant deleveraging followed by a strategic increase in debt levels. While leverage ratios declined substantially from 2017 through 2019, a reversal occurred in 2020, increasing the reliance on borrowed capital relative to equity and assets.
- Leverage and Capital Structure
- Debt to equity ratios peaked at 0.88 in 2016 before experiencing a sharp decline to 0.30 by 2019. This downward trend was mirrored in the debt to capital and debt to assets ratios, which reached their lowest points in 2019 at 0.23 and 0.18, respectively. However, 2020 saw a significant uptick across all these metrics, with the debt to equity ratio rising to 0.65 and the debt to assets ratio increasing to 0.31.
- Impact of Operating Leases
- The inclusion of operating lease liabilities resulted in a marginal increase in solvency ratios. By 2020, the debt to equity ratio adjusted for leases stood at 0.69 compared to 0.65, and the debt to assets ratio was 0.33 compared to 0.31. This indicates that operating lease obligations have a limited but measurable impact on the overall leverage position.
- Financial Leverage and Asset Utilization
- Financial leverage followed a trajectory consistent with the debt ratios, rising to 2.55 in 2016, contracting to a low of 1.71 in 2019, and subsequently increasing to 2.08 in 2020. This movement suggests a cyclical approach to capital structure management during the analyzed period.
- Debt Servicing Capacity
- Despite the fluctuations in total debt, the capacity to service financial obligations remained strong. The interest coverage ratio showed resilience, dipping to 12.74 in 2017 before climbing to a peak of 23.18 in 2020. Similarly, the fixed charge coverage ratio, while experiencing a low of 8.60 in 2017, improved steadily to reach 13.80 by the end of the period. This demonstrates that the organization maintained a substantial margin of safety in meeting its fixed financial commitments regardless of the leverage level.
AI Ask an analyst for more
Debt Ratios
Coverage Ratios
Debt to Equity
Air Products & Chemicals Inc., debt to equity calculation, comparison to benchmarks
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Short-term borrowings | 7,700) | 58,200) | 54,300) | 144,000) | 935,800) | 1,494,300) | |
| Current portion of long-term debt | 470,000) | 40,400) | 406,600) | 416,400) | 371,300) | 435,600) | |
| Long-term debt, excluding current portion | 7,132,900) | 2,907,300) | 2,967,400) | 3,402,400) | 4,918,100) | 3,949,100) | |
| Long-term debt, related party | 297,200) | 320,100) | 384,300) | —) | —) | —) | |
| Total debt | 7,907,800) | 3,326,000) | 3,812,600) | 3,962,800) | 6,225,200) | 5,879,000) | |
| Total Air Products shareholders’ equity | 12,079,800) | 11,053,600) | 10,857,500) | 10,086,200) | 7,079,600) | 7,249,000) | |
| Solvency Ratio | |||||||
| Debt to equity1 | 0.65 | 0.30 | 0.35 | 0.39 | 0.88 | 0.81 | |
| Benchmarks | |||||||
| Debt to Equity, Competitors2 | |||||||
| Linde plc | — | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Debt to equity = Total debt ÷ Total Air Products shareholders’ equity
= 7,907,800 ÷ 12,079,800 = 0.65
2 Click competitor name to see calculations.
The analysis of the solvency position from September 30, 2015, to September 30, 2020, reveals a fluctuating debt-to-equity profile characterized by a period of significant deleveraging followed by a substantial increase in borrowed capital.
- Debt Obligations
- Total debt experienced a modest increase between 2015 and 2016, reaching 6.2 billion US dollars. A consistent downward trend followed from 2017 through 2019, with liabilities decreasing to a period low of 3.3 billion US dollars. However, 2020 marked a sharp reversal, as total debt surged to 7.9 billion US dollars, indicating a significant expansion of the company's borrowing.
- Shareholders' Equity
- Equity demonstrated a strong and generally consistent growth trajectory. Following a slight contraction in 2016, equity grew from approximately 7.0 billion US dollars to 12.0 billion US dollars by September 30, 2020. This steady accumulation of equity indicates a strengthening of the company's internal capital base over the six-year period.
- Debt to Equity Ratio
- The debt to equity ratio reflected the interplay between rising equity and volatile debt levels. The ratio peaked at 0.88 in 2016 before declining sharply to 0.39 in 2017 and reaching a minimum of 0.30 in 2019, suggesting a period of improved solvency and reduced financial leverage. In 2020, the ratio increased to 0.65, driven by the substantial increase in total debt, although the ratio remained lower than its 2016 peak due to the concurrently higher equity levels.
AI Ask an analyst for more
Debt to Equity (including Operating Lease Liability)
Air Products & Chemicals Inc., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Short-term borrowings | 7,700) | 58,200) | 54,300) | 144,000) | 935,800) | 1,494,300) | |
| Current portion of long-term debt | 470,000) | 40,400) | 406,600) | 416,400) | 371,300) | 435,600) | |
| Long-term debt, excluding current portion | 7,132,900) | 2,907,300) | 2,967,400) | 3,402,400) | 4,918,100) | 3,949,100) | |
| Long-term debt, related party | 297,200) | 320,100) | 384,300) | —) | —) | —) | |
| Total debt | 7,907,800) | 3,326,000) | 3,812,600) | 3,962,800) | 6,225,200) | 5,879,000) | |
| Current operating lease liabilities | 70,700) | —) | —) | —) | —) | —) | |
| Noncurrent operating lease liabilities | 335,800) | —) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 8,314,300) | 3,326,000) | 3,812,600) | 3,962,800) | 6,225,200) | 5,879,000) | |
| Total Air Products shareholders’ equity | 12,079,800) | 11,053,600) | 10,857,500) | 10,086,200) | 7,079,600) | 7,249,000) | |
| Solvency Ratio | |||||||
| Debt to equity (including operating lease liability)1 | 0.69 | 0.30 | 0.35 | 0.39 | 0.88 | 0.81 | |
| Benchmarks | |||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | |||||||
| Linde plc | — | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Total Air Products shareholders’ equity
= 8,314,300 ÷ 12,079,800 = 0.69
2 Click competitor name to see calculations.
The solvency position of the entity experienced notable fluctuations over the six-year period from 2015 to 2020, reflecting significant shifts in capital structure and financing strategies. While shareholders' equity grew consistently, the overall solvency metrics were heavily influenced by volatility in total debt obligations.
- Debt to Equity Ratio Trends
- The debt-to-equity ratio initially rose from 0.81 in 2015 to 0.88 in 2016. Subsequently, a sharp decline was observed, with the ratio dropping to 0.39 in 2017 and reaching a period low of 0.30 by 2019. This downward trend reversed abruptly in 2020, when the ratio increased to 0.69, indicating a substantial shift back toward debt-financed capital.
- Total Debt Obligations
- Total debt, including operating lease liabilities, exhibited a bifurcated trend. After a moderate increase in 2016 to US$ 6.23 billion, debt levels decreased steadily for three consecutive years, reaching US$ 3.33 billion by September 30, 2019. This deleveraging phase was followed by a sharp increase in 2020, where total debt surged to US$ 8.31 billion, representing a significant increase of approximately 150% relative to the 2019 balance.
- Shareholders' Equity Growth
- In contrast to the volatility of the debt levels, shareholders' equity demonstrated a consistent upward trajectory throughout the analyzed period. Equity grew from US$ 7.25 billion in 2015 to US$ 12.08 billion in 2020. This steady accumulation of equity served as a stabilizing factor, preventing the 2020 debt surge from pushing the debt-to-equity ratio back to the peak levels observed in 2016.
AI Ask an analyst for more
Debt to Capital
Air Products & Chemicals Inc., debt to capital calculation, comparison to benchmarks
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Short-term borrowings | 7,700) | 58,200) | 54,300) | 144,000) | 935,800) | 1,494,300) | |
| Current portion of long-term debt | 470,000) | 40,400) | 406,600) | 416,400) | 371,300) | 435,600) | |
| Long-term debt, excluding current portion | 7,132,900) | 2,907,300) | 2,967,400) | 3,402,400) | 4,918,100) | 3,949,100) | |
| Long-term debt, related party | 297,200) | 320,100) | 384,300) | —) | —) | —) | |
| Total debt | 7,907,800) | 3,326,000) | 3,812,600) | 3,962,800) | 6,225,200) | 5,879,000) | |
| Total Air Products shareholders’ equity | 12,079,800) | 11,053,600) | 10,857,500) | 10,086,200) | 7,079,600) | 7,249,000) | |
| Total capital | 19,987,600) | 14,379,600) | 14,670,100) | 14,049,000) | 13,304,800) | 13,128,000) | |
| Solvency Ratio | |||||||
| Debt to capital1 | 0.40 | 0.23 | 0.26 | 0.28 | 0.47 | 0.45 | |
| Benchmarks | |||||||
| Debt to Capital, Competitors2 | |||||||
| Linde plc | — | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Debt to capital = Total debt ÷ Total capital
= 7,907,800 ÷ 19,987,600 = 0.40
2 Click competitor name to see calculations.
The solvency profile exhibits a period of significant deleveraging followed by a substantial increase in liabilities. Between 2015 and 2020, the capitalization structure underwent a volatile transition, characterized by a consistent reduction in debt levels for three consecutive years before a sharp reversal in the final period.
- Debt to Capital Ratio Trend
- The ratio reached a peak of 0.47 in 2016, followed by a sustained downward trajectory to a minimum of 0.23 by 2019. This contraction suggests a strategic reduction in financial leverage. However, the ratio ascended sharply to 0.40 in 2020, indicating a renewed reliance on debt financing relative to the total capital base.
- Total Debt Dynamics
- Total debt levels declined significantly from 6.2 billion US dollars in 2016 to approximately 3.3 billion US dollars in 2019. This period of debt reduction was abruptly reversed in 2020, when total debt surged to 7.9 billion US dollars, representing the highest debt obligation within the analyzed timeframe.
- Capitalization Base Evolution
- Total capital showed a general upward trend, increasing from 13.1 billion US dollars in 2015 to 14.7 billion US dollars in 2018. Following a slight contraction in 2019, total capital expanded substantially to approximately 20 billion US dollars in 2020, a growth driven primarily by the increase in total debt.
AI Ask an analyst for more
Debt to Capital (including Operating Lease Liability)
Air Products & Chemicals Inc., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Short-term borrowings | 7,700) | 58,200) | 54,300) | 144,000) | 935,800) | 1,494,300) | |
| Current portion of long-term debt | 470,000) | 40,400) | 406,600) | 416,400) | 371,300) | 435,600) | |
| Long-term debt, excluding current portion | 7,132,900) | 2,907,300) | 2,967,400) | 3,402,400) | 4,918,100) | 3,949,100) | |
| Long-term debt, related party | 297,200) | 320,100) | 384,300) | —) | —) | —) | |
| Total debt | 7,907,800) | 3,326,000) | 3,812,600) | 3,962,800) | 6,225,200) | 5,879,000) | |
| Current operating lease liabilities | 70,700) | —) | —) | —) | —) | —) | |
| Noncurrent operating lease liabilities | 335,800) | —) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 8,314,300) | 3,326,000) | 3,812,600) | 3,962,800) | 6,225,200) | 5,879,000) | |
| Total Air Products shareholders’ equity | 12,079,800) | 11,053,600) | 10,857,500) | 10,086,200) | 7,079,600) | 7,249,000) | |
| Total capital (including operating lease liability) | 20,394,100) | 14,379,600) | 14,670,100) | 14,049,000) | 13,304,800) | 13,128,000) | |
| Solvency Ratio | |||||||
| Debt to capital (including operating lease liability)1 | 0.41 | 0.23 | 0.26 | 0.28 | 0.47 | 0.45 | |
| Benchmarks | |||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | |||||||
| Linde plc | — | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 8,314,300 ÷ 20,394,100 = 0.41
2 Click competitor name to see calculations.
The debt to capital ratio exhibited a fluctuating trend between 2015 and 2020, characterized by a sustained period of deleveraging followed by a sharp expansion in both total liabilities and the overall capital base.
- Deleveraging Phase (2016–2019)
- Following a peak ratio of 0.47 in 2016, a consistent downward trend in the reliance on debt was observed. Total debt, including operating lease liabilities, decreased significantly from US$ 6.23 billion in 2016 to US$ 3.33 billion by 2019. During this same period, total capital grew steadily from US$ 13.30 billion to US$ 14.38 billion. This combination of debt reduction and capital growth resulted in the debt to capital ratio reaching a period low of 0.23 in 2019, indicating a strengthened solvency position.
- Capital Expansion and Debt Surge (2020)
- A substantial shift in the capital structure occurred in 2020. Total debt rose sharply to US$ 8.31 billion, representing a more than twofold increase from the 2019 level. This increase was accompanied by a significant rise in total capital to US$ 20.39 billion. As a result, the debt to capital ratio increased to 0.41, reversing the prior three-year trend of declining leverage.
AI Ask an analyst for more
Debt to Assets
Air Products & Chemicals Inc., debt to assets calculation, comparison to benchmarks
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Short-term borrowings | 7,700) | 58,200) | 54,300) | 144,000) | 935,800) | 1,494,300) | |
| Current portion of long-term debt | 470,000) | 40,400) | 406,600) | 416,400) | 371,300) | 435,600) | |
| Long-term debt, excluding current portion | 7,132,900) | 2,907,300) | 2,967,400) | 3,402,400) | 4,918,100) | 3,949,100) | |
| Long-term debt, related party | 297,200) | 320,100) | 384,300) | —) | —) | —) | |
| Total debt | 7,907,800) | 3,326,000) | 3,812,600) | 3,962,800) | 6,225,200) | 5,879,000) | |
| Total assets | 25,168,500) | 18,942,800) | 19,178,300) | 18,467,200) | 18,055,300) | 17,438,100) | |
| Solvency Ratio | |||||||
| Debt to assets1 | 0.31 | 0.18 | 0.20 | 0.21 | 0.34 | 0.34 | |
| Benchmarks | |||||||
| Debt to Assets, Competitors2 | |||||||
| Linde plc | — | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Debt to assets = Total debt ÷ Total assets
= 7,907,800 ÷ 25,168,500 = 0.31
2 Click competitor name to see calculations.
The solvency profile exhibits a distinct trajectory between 2015 and 2020, characterized by an initial period of stability, a multi-year deleveraging phase, and a sharp increase in both debt and assets in the final period.
- Debt to Assets Ratio Trends
- Between 2015 and 2016, the ratio remained constant at 0.34, indicating that the growth in total debt was proportional to the increase in total assets. A significant deleveraging trend began in 2017, with the ratio dropping to 0.21 and continuing a downward trajectory to reach a minimum of 0.18 by September 30, 2019. This reduction was driven by a substantial decrease in total debt, which fell from 6.23 billion USD in 2016 to 3.33 billion USD in 2019, while total assets remained relatively stable or grew moderately.
- Analysis of 2020 Fiscal Shift
- The period ending September 30, 2020, shows a reversal of the previous trend. Total debt increased sharply to 7.91 billion USD, the highest level in the observed period. Simultaneously, total assets expanded significantly to 25.17 billion USD. This dual increase resulted in the debt to assets ratio rising to 0.31. Although this marks a substantial increase from the 2019 low, the ratio remains below the 0.34 level observed in 2015 and 2016, suggesting that the growth in the asset base mitigated the impact of the increased debt load.
AI Ask an analyst for more
Debt to Assets (including Operating Lease Liability)
Air Products & Chemicals Inc., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Short-term borrowings | 7,700) | 58,200) | 54,300) | 144,000) | 935,800) | 1,494,300) | |
| Current portion of long-term debt | 470,000) | 40,400) | 406,600) | 416,400) | 371,300) | 435,600) | |
| Long-term debt, excluding current portion | 7,132,900) | 2,907,300) | 2,967,400) | 3,402,400) | 4,918,100) | 3,949,100) | |
| Long-term debt, related party | 297,200) | 320,100) | 384,300) | —) | —) | —) | |
| Total debt | 7,907,800) | 3,326,000) | 3,812,600) | 3,962,800) | 6,225,200) | 5,879,000) | |
| Current operating lease liabilities | 70,700) | —) | —) | —) | —) | —) | |
| Noncurrent operating lease liabilities | 335,800) | —) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 8,314,300) | 3,326,000) | 3,812,600) | 3,962,800) | 6,225,200) | 5,879,000) | |
| Total assets | 25,168,500) | 18,942,800) | 19,178,300) | 18,467,200) | 18,055,300) | 17,438,100) | |
| Solvency Ratio | |||||||
| Debt to assets (including operating lease liability)1 | 0.33 | 0.18 | 0.20 | 0.21 | 0.34 | 0.34 | |
| Benchmarks | |||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | |||||||
| Linde plc | — | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 8,314,300 ÷ 25,168,500 = 0.33
2 Click competitor name to see calculations.
The solvency profile of the entity between 2015 and 2020 is characterized by a distinct three-phase movement: initial stability, a period of aggressive deleveraging, and a subsequent substantial increase in both liabilities and assets.
- Initial Stability and Deleveraging (2015–2019)
- From 2015 to 2016, the debt to assets ratio remained constant at 0.34, indicating a balanced relationship between total debt and the asset base. Starting in 2017, a significant downward trend in leverage occurred. Total debt decreased from US$ 6.23 billion in 2016 to US$ 3.33 billion by 2019. During this same window, total assets grew steadily from US$ 18.06 billion to US$ 18.94 billion. This combination of debt reduction and asset growth resulted in the debt to assets ratio falling to its lowest point of 0.18 in 2019, suggesting a marked improvement in solvency and a reduction in financial risk.
- Capital Expansion and Leverage Reversion (2020)
- A sharp reversal in the solvency trend is observed in 2020. Total debt increased substantially to US$ 8.31 billion, while total assets rose to US$ 25.17 billion. This simultaneous surge suggests a period of significant capital expenditure or acquisition funded through debt. Consequently, the debt to assets ratio rose to 0.33, effectively returning the company to the solvency levels observed in 2015 and 2016.
- Long-term Solvency Correlation
- The overall trajectory demonstrates that while the entity successfully reduced its reliance on debt for several years, it utilized its balance sheet capacity in 2020 to aggressively expand its asset base. Despite the large increase in nominal debt, the ratio remained slightly below the 2015-2016 peak, indicating that asset growth largely kept pace with the new debt obligations.
AI Ask an analyst for more
Financial Leverage
Air Products & Chemicals Inc., financial leverage calculation, comparison to benchmarks
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Total assets | 25,168,500) | 18,942,800) | 19,178,300) | 18,467,200) | 18,055,300) | 17,438,100) | |
| Total Air Products shareholders’ equity | 12,079,800) | 11,053,600) | 10,857,500) | 10,086,200) | 7,079,600) | 7,249,000) | |
| Solvency Ratio | |||||||
| Financial leverage1 | 2.08 | 1.71 | 1.77 | 1.83 | 2.55 | 2.41 | |
| Benchmarks | |||||||
| Financial Leverage, Competitors2 | |||||||
| Linde plc | — | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Financial leverage = Total assets ÷ Total Air Products shareholders’ equity
= 25,168,500 ÷ 12,079,800 = 2.08
2 Click competitor name to see calculations.
Between 2015 and 2020, the balance sheet structure exhibited significant shifts characterized by a substantial expansion of assets and a strengthening of shareholders' equity, which collectively influenced the volatility of the financial leverage ratio.
- Asset Growth Trends
- Total assets showed a consistent upward trajectory from 2015 through 2018, rising from 17.4 billion US$ to 19.2 billion US$. Following a marginal decline in 2019 to 18.9 billion US$, a substantial increase was recorded in 2020, with total assets reaching 25.2 billion US$. This represents a significant expansion of the asset base in the final year of the period.
- Shareholders' Equity Development
- Equity remained relatively stable between 2015 and 2016, followed by a sharp increase in 2017, where it rose from 7.1 billion US$ to 10.1 billion US$. This upward trend continued steadily through 2020, ending at 12.1 billion US$, indicating a strengthened internal capital position over the six-year duration.
- Financial Leverage Dynamics
- The financial leverage ratio experienced a period of fluctuation. After an initial increase from 2.41 in 2015 to 2.55 in 2016, a marked reduction occurred in 2017, bringing the ratio down to 1.83. This downward trend persisted through 2019, reaching a period low of 1.71. However, the ratio rose to 2.08 in 2020, coinciding with the surge in total assets, which suggests an increase in the proportion of debt relative to equity to facilitate asset growth.
AI Ask an analyst for more
Interest Coverage
Air Products & Chemicals Inc., interest coverage calculation, comparison to benchmarks
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net income attributable to Air Products | 1,886,700) | 1,760,000) | 1,497,800) | 3,000,400) | 631,100) | 1,277,900) | |
| Add: Net income attributable to noncontrolling interest | 44,400) | 49,400) | 35,100) | 20,800) | 30,400) | 39,700) | |
| Less: Income (loss) from discontinued operations, net of tax | (14,300) | —) | 42,200) | 1,866,000) | (884,200) | —) | |
| Add: Income tax expense | 478,400) | 480,100) | 524,300) | 260,900) | 586,500) | 415,900) | |
| Add: Interest expense | 109,300) | 137,000) | 130,500) | 120,600) | 115,500) | 103,500) | |
| Earnings before interest and tax (EBIT) | 2,533,100) | 2,426,500) | 2,145,500) | 1,536,700) | 2,247,700) | 1,837,000) | |
| Solvency Ratio | |||||||
| Interest coverage1 | 23.18 | 17.71 | 16.44 | 12.74 | 19.46 | 17.75 | |
| Benchmarks | |||||||
| Interest Coverage, Competitors2 | |||||||
| Linde plc | — | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Interest coverage = EBIT ÷ Interest expense
= 2,533,100 ÷ 109,300 = 23.18
2 Click competitor name to see calculations.
The company maintains a strong solvency position throughout the period from 2015 to 2020, characterized by a consistent ability to cover interest obligations from operating profits. While the interest coverage ratio experienced some volatility, it remained well above critical thresholds, indicating a low risk of default.
- Earnings Before Interest and Tax (EBIT) Trends
- Operating earnings exhibited an overall growth trend, rising from US$ 1,837,000 thousand in 2015 to US$ 2,533,100 thousand in 2020. A notable contraction occurred in 2017, where EBIT fell to US$ 1,536,700 thousand, representing the lowest point in the analyzed period. Following this dip, earnings recovered steadily over the subsequent three years.
- Interest Expense Analysis
- Interest expenses showed a steady upward trend between 2015 and 2019, increasing from US$ 103,500 thousand to a peak of US$ 137,000 thousand. However, a significant reversal occurred in 2020, with expenses decreasing to US$ 109,300 thousand, suggesting a reduction in debt load or more favorable financing terms.
- Interest Coverage Ratio Interpretation
- The interest coverage ratio fluctuated in alignment with EBIT performance, dropping from 19.46 in 2016 to 12.74 in 2017 due to the decline in operating earnings. A strong recovery followed, culminating in a period high of 23.18 in 2020. This peak was driven by the dual effect of increasing EBIT and decreasing interest expenses, substantially enhancing the margin of safety for creditors.
AI Ask an analyst for more
Fixed Charge Coverage
Air Products & Chemicals Inc., fixed charge coverage calculation, comparison to benchmarks
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net income attributable to Air Products | 1,886,700) | 1,760,000) | 1,497,800) | 3,000,400) | 631,100) | 1,277,900) | |
| Add: Net income attributable to noncontrolling interest | 44,400) | 49,400) | 35,100) | 20,800) | 30,400) | 39,700) | |
| Less: Income (loss) from discontinued operations, net of tax | (14,300) | —) | 42,200) | 1,866,000) | (884,200) | —) | |
| Add: Income tax expense | 478,400) | 480,100) | 524,300) | 260,900) | 586,500) | 415,900) | |
| Add: Interest expense | 109,300) | 137,000) | 130,500) | 120,600) | 115,500) | 103,500) | |
| Earnings before interest and tax (EBIT) | 2,533,100) | 2,426,500) | 2,145,500) | 1,536,700) | 2,247,700) | 1,837,000) | |
| Add: Operating lease expense | 80,100) | 87,000) | 82,700) | 65,800) | 80,800) | 95,500) | |
| Earnings before fixed charges and tax | 2,613,200) | 2,513,500) | 2,228,200) | 1,602,500) | 2,328,500) | 1,932,500) | |
| Interest expense | 109,300) | 137,000) | 130,500) | 120,600) | 115,500) | 103,500) | |
| Operating lease expense | 80,100) | 87,000) | 82,700) | 65,800) | 80,800) | 95,500) | |
| Fixed charges | 189,400) | 224,000) | 213,200) | 186,400) | 196,300) | 199,000) | |
| Solvency Ratio | |||||||
| Fixed charge coverage1 | 13.80 | 11.22 | 10.45 | 8.60 | 11.86 | 9.71 | |
| Benchmarks | |||||||
| Fixed Charge Coverage, Competitors2 | |||||||
| Linde plc | — | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 2,613,200 ÷ 189,400 = 13.80
2 Click competitor name to see calculations.
An analysis of solvency over the six-year period from 2015 to 2020 indicates a robust capacity to cover fixed obligations, characterized by a general increase in earnings relative to fixed costs.
- Earnings before fixed charges and tax
- Earnings exhibited an overall upward trajectory, growing from US$ 1,932,500 thousand in 2015 to US$ 2,613,200 thousand in 2020. A significant contraction is observed in 2017, where earnings declined to US$ 1,602,500 thousand, followed by a consistent recovery and growth phase from 2018 through 2020.
- Fixed charges stability
- Fixed charges remained relatively stable throughout the analyzed period. The costs fluctuated within a narrow range, peaking at US$ 224,000 thousand in 2019 and reaching a minimum of US$ 186,400 thousand in 2017. This stability indicates that the cost of fixed obligations has not grown proportionally with the increase in earnings.
- Fixed charge coverage ratio
- The coverage ratio reflects the volatility in earnings, reaching a period low of 8.60 in 2017. Following this dip, the ratio improved steadily, ascending to 10.45 in 2018 and 11.22 in 2019. By September 30, 2020, the ratio reached its peak at 13.80, suggesting a strengthened solvency position and an increased margin of safety for meeting fixed financial commitments.
AI Ask an analyst for more