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
Carrier Global Corp., 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).
An analysis of solvency ratios from 2020 to 2022 reveals a consistent trend of deleveraging and an overall improvement in long-term financial stability. There is a visible reduction in reliance on debt relative to equity, assets, and total capital, coupled with a significant strengthening of the ability to service fixed obligations by the conclusion of the period.
- Debt-to-Equity and Capital Structure
- A steady downward trajectory is observed across all primary leverage metrics. The debt-to-equity ratio decreased from 1.64 in 2020 to 1.14 in 2022, a trend mirrored in the figures inclusive of operating lease liabilities, which fell from 1.76 to 1.22. Similarly, the debt-to-capital ratio declined from 0.62 to 0.53, indicating a systemic shift toward a more conservative capital structure.
- Asset-Based Solvency and Financial Leverage
- The proportion of assets financed through debt decreased from 0.41 to 0.34 between 2020 and 2022. This reduction in the debt-to-assets ratio is consistent with the decline in the financial leverage ratio, which moved from 4.01 to 3.36 over the same period, suggesting a reduced risk profile regarding the funding of total assets.
- Debt Service Coverage
- Coverage ratios exhibited temporary volatility but ended the period at their highest levels. The interest coverage ratio declined from 10.58 in 2020 to 8.52 in 2021 before rising sharply to 15.21 in 2022. A similar pattern is evident in the fixed charge coverage ratio, which recovered from a 2021 low of 5.62 to reach 10.54 by the end of 2022, demonstrating a substantially increased capacity to meet interest and fixed obligations.
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Debt to Equity
Carrier Global Corp., debt to equity calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Current portion of long-term debt | 140) | 183) | 191) | |
| Long-term debt, net of current portion | 8,702) | 9,513) | 10,036) | |
| Total debt | 8,842) | 9,696) | 10,227) | |
| Equity attributable to common shareowners | 7,758) | 6,767) | 6,252) | |
| Solvency Ratio | ||||
| Debt to equity1 | 1.14 | 1.43 | 1.64 | |
| Benchmarks | ||||
| Debt to Equity, Competitors2 | ||||
| Boeing Co. | — | — | — | |
| Caterpillar Inc. | 2.33 | 2.29 | — | |
| Eaton Corp. plc | 0.51 | 0.52 | — | |
| GE Aerospace | 0.89 | 0.87 | — | |
| Honeywell International Inc. | 1.17 | 1.06 | — | |
| Lockheed Martin Corp. | 1.68 | 1.07 | — | |
| RTX Corp. | 0.44 | 0.43 | — | |
| Debt to Equity, Sector | ||||
| Capital Goods | 1.33 | 1.26 | — | |
| Debt to Equity, Industry | ||||
| Industrials | 1.42 | 1.37 | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2022 Calculation
Debt to equity = Total debt ÷ Equity attributable to common shareowners
= 8,842 ÷ 7,758 = 1.14
2 Click competitor name to see calculations.
A consistent improvement in the solvency profile is observed over the three-year period ending December 31, 2022. The financial trajectory is characterized by a disciplined approach to deleveraging, driven by a simultaneous reduction in total liabilities and a strengthening of the equity base.
- Total Debt Reduction
- Total debt decreased steadily from 10,227 million US dollars in 2020 to 8,842 million US dollars by the end of 2022. This represents a total reduction of 1,385 million US dollars, indicating a sustained effort to lower the total amount of borrowed capital.
- Growth in Shareholders' Equity
- Equity attributable to common shareowners grew consistently, rising from 6,252 million US dollars in 2020 to 7,758 million US dollars in 2022. This upward trend indicates an increase in the company's net asset value and a more robust capital cushion.
- Debt to Equity Ratio Performance
- The debt to equity ratio experienced a significant and linear decline, falling from 1.64 in 2020 to 1.43 in 2021, and further to 1.14 by 2022. This downward trend reflects a shift toward a more conservative capital structure and a reduced reliance on debt relative to equity.
The combined effect of decreasing debt and increasing equity has resulted in a substantial improvement in solvency. The reduction of 0.50 points in the debt to equity ratio over the observed period highlights a decrease in financial risk and an enhanced long-term financial position.
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Debt to Equity (including Operating Lease Liability)
Carrier Global Corp., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Current portion of long-term debt | 140) | 183) | 191) | |
| Long-term debt, net of current portion | 8,702) | 9,513) | 10,036) | |
| Total debt | 8,842) | 9,696) | 10,227) | |
| Current operating lease liabilities (included in Accrued liabilities) | 132) | 130) | 161) | |
| Long-term operating lease liabilities | 529) | 527) | 642) | |
| Total debt (including operating lease liability) | 9,503) | 10,353) | 11,030) | |
| Equity attributable to common shareowners | 7,758) | 6,767) | 6,252) | |
| Solvency Ratio | ||||
| Debt to equity (including operating lease liability)1 | 1.22 | 1.53 | 1.76 | |
| Benchmarks | ||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||
| Boeing Co. | — | — | — | |
| Caterpillar Inc. | 2.37 | 2.33 | — | |
| Eaton Corp. plc | 0.54 | 0.55 | — | |
| GE Aerospace | 0.96 | 0.94 | — | |
| Honeywell International Inc. | 1.23 | 1.11 | — | |
| Lockheed Martin Corp. | 1.81 | 1.19 | — | |
| RTX Corp. | 0.47 | 0.46 | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||
| Capital Goods | 1.39 | 1.32 | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||
| Industrials | 1.59 | 1.54 | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2022 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Equity attributable to common shareowners
= 9,503 ÷ 7,758 = 1.22
2 Click competitor name to see calculations.
A consistent improvement in the solvency profile is observed between 2020 and 2022, driven by a dual strategy of debt reduction and equity growth. The overall financial risk associated with leverage has diminished steadily over this three-year period.
- Total Debt Reduction
- Total debt, including operating lease liabilities, exhibited a continuous downward trend, decreasing from US$ 11,030 million in 2020 to US$ 9,503 million in 2022. This represents a total reduction of approximately 13.8% over the analyzed timeframe.
- Equity Appreciation
- Equity attributable to common shareowners increased steadily, rising from US$ 6,252 million in 2020 to US$ 7,758 million in 2022. The growth in equity indicates a strengthening of the internal capital base.
- Debt to Equity Ratio Trajectory
- The debt to equity ratio declined significantly from 1.76 in 2020 to 1.22 in 2022. This contraction is the result of the simultaneous decrease in total liabilities and the increase in shareholder equity, signaling a transition toward a more conservative and sustainable capital structure.
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Debt to Capital
Carrier Global Corp., debt to capital calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Current portion of long-term debt | 140) | 183) | 191) | |
| Long-term debt, net of current portion | 8,702) | 9,513) | 10,036) | |
| Total debt | 8,842) | 9,696) | 10,227) | |
| Equity attributable to common shareowners | 7,758) | 6,767) | 6,252) | |
| Total capital | 16,600) | 16,463) | 16,479) | |
| Solvency Ratio | ||||
| Debt to capital1 | 0.53 | 0.59 | 0.62 | |
| Benchmarks | ||||
| Debt to Capital, Competitors2 | ||||
| Boeing Co. | 1.39 | 1.35 | — | |
| Caterpillar Inc. | 0.70 | 0.70 | — | |
| Eaton Corp. plc | 0.34 | 0.34 | — | |
| GE Aerospace | 0.47 | 0.47 | — | |
| Honeywell International Inc. | 0.54 | 0.51 | — | |
| Lockheed Martin Corp. | 0.63 | 0.52 | — | |
| RTX Corp. | 0.31 | 0.30 | — | |
| Debt to Capital, Sector | ||||
| Capital Goods | 0.57 | 0.56 | — | |
| Debt to Capital, Industry | ||||
| Industrials | 0.59 | 0.58 | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2022 Calculation
Debt to capital = Total debt ÷ Total capital
= 8,842 ÷ 16,600 = 0.53
2 Click competitor name to see calculations.
An analysis of the solvency metrics reveals a consistent trend of deleveraging between 2020 and 2022. The company has systematically reduced its debt burden while maintaining a stable capital base, resulting in a strengthened solvency profile.
- Total Debt Reduction
- A steady decline in total debt is observed over the three-year period. Obligations decreased from 10,227 million USD in 2020 to 9,696 million USD in 2021, and further declined to 8,842 million USD by the end of 2022. This reflects a disciplined approach to debt repayment or a reduction in new borrowing.
- Capital Stability
- Total capital remained remarkably stable throughout the period. After a marginal decrease from 16,479 million USD in 2020 to 16,463 million USD in 2021, the figure rose slightly to 16,600 million USD in 2022, indicating that the overall size of the capital structure was maintained while its composition shifted.
- Debt to Capital Ratio Trend
- The debt to capital ratio exhibits a clear downward trajectory, moving from 0.62 in 2020 to 0.59 in 2021, and finally to 0.53 in 2022. This trend confirms a reduction in the company's reliance on debt to fund its operations and capital structure, thereby decreasing financial leverage and improving overall solvency.
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Debt to Capital (including Operating Lease Liability)
Carrier Global Corp., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Current portion of long-term debt | 140) | 183) | 191) | |
| Long-term debt, net of current portion | 8,702) | 9,513) | 10,036) | |
| Total debt | 8,842) | 9,696) | 10,227) | |
| Current operating lease liabilities (included in Accrued liabilities) | 132) | 130) | 161) | |
| Long-term operating lease liabilities | 529) | 527) | 642) | |
| Total debt (including operating lease liability) | 9,503) | 10,353) | 11,030) | |
| Equity attributable to common shareowners | 7,758) | 6,767) | 6,252) | |
| Total capital (including operating lease liability) | 17,261) | 17,120) | 17,282) | |
| Solvency Ratio | ||||
| Debt to capital (including operating lease liability)1 | 0.55 | 0.60 | 0.64 | |
| Benchmarks | ||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||
| Boeing Co. | 1.37 | 1.34 | — | |
| Caterpillar Inc. | 0.70 | 0.70 | — | |
| Eaton Corp. plc | 0.35 | 0.36 | — | |
| GE Aerospace | 0.49 | 0.49 | — | |
| Honeywell International Inc. | 0.55 | 0.53 | — | |
| Lockheed Martin Corp. | 0.64 | 0.54 | — | |
| RTX Corp. | 0.32 | 0.31 | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||
| Capital Goods | 0.58 | 0.57 | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||
| Industrials | 0.61 | 0.61 | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2022 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 9,503 ÷ 17,261 = 0.55
2 Click competitor name to see calculations.
A consistent reduction in financial leverage is observed between 2020 and 2022. This trend is primarily driven by a steady decline in total debt while the total capital base remained relatively stable over the three-year period.
- Total Debt (including operating lease liability)
- A sustained downward trajectory is evident, with total debt decreasing from US$ 11,030 million in 2020 to US$ 10,353 million in 2021, and further to US$ 9,503 million by the end of 2022. This represents a cumulative reduction of approximately 13.8% in total obligations.
- Total Capital (including operating lease liability)
- The total capital base exhibited minimal volatility. It started at US$ 17,282 million in 2020, experienced a slight contraction to US$ 17,120 million in 2021, and returned to US$ 17,261 million in 2022, indicating a stable capital structure.
- Debt to Capital Ratio
- The solvency ratio demonstrates a steady improvement, declining from 0.64 in 2020 to 0.60 in 2021, and ending at 0.55 in 2022. This progression indicates that a decreasing proportion of the company's capital is financed through debt, reflecting a reduction in financial risk and an enhanced solvency position.
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Debt to Assets
Carrier Global Corp., debt to assets calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Current portion of long-term debt | 140) | 183) | 191) | |
| Long-term debt, net of current portion | 8,702) | 9,513) | 10,036) | |
| Total debt | 8,842) | 9,696) | 10,227) | |
| Total assets | 26,086) | 26,172) | 25,093) | |
| Solvency Ratio | ||||
| Debt to assets1 | 0.34 | 0.37 | 0.41 | |
| Benchmarks | ||||
| Debt to Assets, Competitors2 | ||||
| Boeing Co. | 0.42 | 0.42 | — | |
| Caterpillar Inc. | 0.45 | 0.46 | — | |
| Eaton Corp. plc | 0.25 | 0.25 | — | |
| GE Aerospace | 0.17 | 0.18 | — | |
| Honeywell International Inc. | 0.31 | 0.30 | — | |
| Lockheed Martin Corp. | 0.29 | 0.23 | — | |
| RTX Corp. | 0.20 | 0.20 | — | |
| Debt to Assets, Sector | ||||
| Capital Goods | 0.28 | 0.28 | — | |
| Debt to Assets, Industry | ||||
| Industrials | 0.31 | 0.30 | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2022 Calculation
Debt to assets = Total debt ÷ Total assets
= 8,842 ÷ 26,086 = 0.34
2 Click competitor name to see calculations.
Carrier Global Corp. demonstrated a consistent improvement in its solvency profile between 2020 and 2022, characterized by a steady reduction in financial leverage relative to its asset base.
- Total Debt Reduction
- A continuous decline in total debt is observed, falling from 10,227 million USD in 2020 to 8,842 million USD by the end of 2022. This represents a sustained trend of deleveraging over the three-year period.
- Asset Base Stability
- Total assets remained relatively stable, moving from 25,093 million USD in 2020 to 26,086 million USD in 2022. The stability of the asset base suggests that the decrease in total debt was not the result of significant asset divestitures.
- Debt to Assets Ratio Trend
- The debt to assets ratio exhibited a clear downward trajectory, decreasing from 0.41 in 2020 to 0.37 in 2021, and further to 0.34 in 2022. This trend indicates a reduction in the proportion of assets financed by debt, which enhances the company's long-term financial stability and reduces its overall solvency risk.
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Debt to Assets (including Operating Lease Liability)
Carrier Global Corp., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Current portion of long-term debt | 140) | 183) | 191) | |
| Long-term debt, net of current portion | 8,702) | 9,513) | 10,036) | |
| Total debt | 8,842) | 9,696) | 10,227) | |
| Current operating lease liabilities (included in Accrued liabilities) | 132) | 130) | 161) | |
| Long-term operating lease liabilities | 529) | 527) | 642) | |
| Total debt (including operating lease liability) | 9,503) | 10,353) | 11,030) | |
| Total assets | 26,086) | 26,172) | 25,093) | |
| Solvency Ratio | ||||
| Debt to assets (including operating lease liability)1 | 0.36 | 0.40 | 0.44 | |
| Benchmarks | ||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||
| Boeing Co. | 0.43 | 0.43 | — | |
| Caterpillar Inc. | 0.46 | 0.46 | — | |
| Eaton Corp. plc | 0.26 | 0.27 | — | |
| GE Aerospace | 0.19 | 0.19 | — | |
| Honeywell International Inc. | 0.33 | 0.32 | — | |
| Lockheed Martin Corp. | 0.32 | 0.26 | — | |
| RTX Corp. | 0.21 | 0.21 | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||
| Capital Goods | 0.30 | 0.29 | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||
| Industrials | 0.34 | 0.34 | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2022 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 9,503 ÷ 26,086 = 0.36
2 Click competitor name to see calculations.
A consistent improvement in the solvency profile is observed between 2020 and 2022, characterized by a steady reduction in financial leverage and a strengthening of the overall balance sheet structure.
- Total Debt Trends
- Total debt, including operating lease liabilities, exhibited a continuous decline over the analyzed period. Obligations decreased from US$ 11,030 million in 2020 to US$ 10,353 million in 2021, and further down to US$ 9,503 million by December 31, 2022. This downward trajectory indicates a systematic reduction in total borrowed capital.
- Asset Base Performance
- Total assets remained relatively stable throughout the three-year window. An initial increase from US$ 25,093 million in 2020 to US$ 26,172 million in 2021 was followed by a marginal correction to US$ 26,086 million in 2022, suggesting that the asset base was maintained while liabilities were reduced.
- Debt to Assets Ratio Analysis
- The debt to assets ratio shows a clear and progressive decline, moving from 0.44 in 2020 to 0.40 in 2021, and finishing at 0.36 in 2022. This trend signifies that a smaller percentage of the company's assets is financed through debt, which typically correlates with reduced financial risk and improved long-term solvency.
The improvement in the solvency ratio is primarily attributable to the reduction in total debt rather than significant growth in the asset base. The transition from a ratio of 0.44 to 0.36 reflects a strategic shift toward a less leveraged capital structure.
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Financial Leverage
Carrier Global Corp., financial leverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Total assets | 26,086) | 26,172) | 25,093) | |
| Equity attributable to common shareowners | 7,758) | 6,767) | 6,252) | |
| Solvency Ratio | ||||
| Financial leverage1 | 3.36 | 3.87 | 4.01 | |
| Benchmarks | ||||
| Financial Leverage, Competitors2 | ||||
| Boeing Co. | — | — | — | |
| Caterpillar Inc. | 5.16 | 5.02 | — | |
| Eaton Corp. plc | 2.06 | 2.07 | — | |
| GE Aerospace | 5.16 | 4.93 | — | |
| Honeywell International Inc. | 3.73 | 3.47 | — | |
| Lockheed Martin Corp. | 5.71 | 4.64 | — | |
| RTX Corp. | 2.19 | 2.21 | — | |
| Financial Leverage, Sector | ||||
| Capital Goods | 4.71 | 4.55 | — | |
| Financial Leverage, Industry | ||||
| Industrials | 4.65 | 4.52 | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2022 Calculation
Financial leverage = Total assets ÷ Equity attributable to common shareowners
= 26,086 ÷ 7,758 = 3.36
2 Click competitor name to see calculations.
An evaluation of the solvency indicators between December 31, 2020, and December 31, 2022, demonstrates a consistent improvement in the capital structure. A steady reduction in financial leverage is evident, reflecting a decrease in the proportion of debt used to finance total assets over the three-year period.
- Financial Leverage Trend
- The financial leverage ratio exhibited a consistent downward trajectory, decreasing from 4.01 in 2020 to 3.87 in 2021, and further declining to 3.36 by the end of 2022. This trend indicates a reduction in financial risk and a strengthened solvency position.
- Equity Growth
- Equity attributable to common shareowners increased steadily throughout the analyzed period. The value rose from 6,252 million US dollars in 2020 to 6,767 million US dollars in 2021, reaching 7,758 million US dollars by December 31, 2022. This growth in the equity base has served as the primary driver for the reduction in the leverage ratio.
- Total Asset Stability
- Total assets remained relatively stable over the period, starting at 25,093 million US dollars in 2020, increasing slightly to 26,172 million US dollars in 2021, and ending at 26,086 million US dollars in 2022. The stability of the asset base, paired with the simultaneous increase in equity, confirms a deliberate deleveraging process.
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Interest Coverage
Carrier Global Corp., interest coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Net income attributable to common shareowners | 3,534) | 1,664) | 1,982) | |
| Add: Net income attributable to noncontrolling interest | 50) | 37) | 24) | |
| Add: Income tax expense | 708) | 699) | 849) | |
| Add: Interest expense | 302) | 319) | 298) | |
| Earnings before interest and tax (EBIT) | 4,594) | 2,719) | 3,153) | |
| Solvency Ratio | ||||
| Interest coverage1 | 15.21 | 8.52 | 10.58 | |
| Benchmarks | ||||
| Interest Coverage, Competitors2 | ||||
| Boeing Co. | -0.98 | -0.88 | — | |
| Caterpillar Inc. | 20.80 | 17.88 | — | |
| Eaton Corp. plc | 21.22 | 21.11 | — | |
| GE Aerospace | 1.88 | -0.96 | — | |
| Honeywell International Inc. | 16.41 | 22.09 | — | |
| Lockheed Martin Corp. | 11.72 | 14.27 | — | |
| RTX Corp. | 5.64 | 4.71 | — | |
| Interest Coverage, Sector | ||||
| Capital Goods | 4.84 | 3.98 | — | |
| Interest Coverage, Industry | ||||
| Industrials | 4.98 | 5.14 | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2022 Calculation
Interest coverage = EBIT ÷ Interest expense
= 4,594 ÷ 302 = 15.21
2 Click competitor name to see calculations.
The analysis of the interest coverage ratio reveals a fluctuating but ultimately strengthening capacity to service debt obligations between 2020 and 2022. While there was a temporary decline in coverage in 2021, the company ended the period with a significantly improved solvency position.
- Earnings Before Interest and Tax (EBIT) Trends
- Operating earnings experienced volatility over the three-year period. After a decrease from US$ 3,153 million in 2020 to US$ 2,719 million in 2021, EBIT grew substantially to US$ 4,594 million by December 31, 2022. This represents a marked increase in operational profitability and the primary driver for the improvement in solvency metrics.
- Interest Expense Stability
- Interest expenses remained relatively stable throughout the period, fluctuating minimally between US$ 298 million and US$ 319 million. The lack of significant volatility in interest costs indicates a consistent debt service requirement, regardless of the fluctuations in operating income.
- Interest Coverage Ratio Performance
- The interest coverage ratio mirrored the movement of EBIT due to the stability of interest expenses. The ratio declined from 10.58 in 2020 to 8.52 in 2021, suggesting a temporary reduction in the margin of safety for debt payments. However, the ratio surged to 15.21 in 2022, indicating that the company's earnings were more than fifteen times its interest obligations, reflecting a robust ability to manage its debt load.
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Fixed Charge Coverage
Carrier Global Corp., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Net income attributable to common shareowners | 3,534) | 1,664) | 1,982) | |
| Add: Net income attributable to noncontrolling interest | 50) | 37) | 24) | |
| Add: Income tax expense | 708) | 699) | 849) | |
| Add: Interest expense | 302) | 319) | 298) | |
| Earnings before interest and tax (EBIT) | 4,594) | 2,719) | 3,153) | |
| Add: Operating lease expense | 148) | 200) | 197) | |
| Earnings before fixed charges and tax | 4,742) | 2,919) | 3,350) | |
| Interest expense | 302) | 319) | 298) | |
| Operating lease expense | 148) | 200) | 197) | |
| Fixed charges | 450) | 519) | 495) | |
| Solvency Ratio | ||||
| Fixed charge coverage1 | 10.54 | 5.62 | 6.77 | |
| Benchmarks | ||||
| Fixed Charge Coverage, Competitors2 | ||||
| Boeing Co. | -0.70 | -0.64 | — | |
| Caterpillar Inc. | 14.92 | 12.73 | — | |
| Eaton Corp. plc | 10.01 | 10.40 | — | |
| GE Aerospace | 1.35 | -0.22 | — | |
| Honeywell International Inc. | 11.00 | 13.67 | — | |
| Lockheed Martin Corp. | 8.44 | 9.95 | — | |
| RTX Corp. | 4.40 | 3.66 | — | |
| Fixed Charge Coverage, Sector | ||||
| Capital Goods | 3.61 | 3.06 | — | |
| Fixed Charge Coverage, Industry | ||||
| Industrials | 3.30 | 3.44 | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2022 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 4,742 ÷ 450 = 10.54
2 Click competitor name to see calculations.
The solvency profile regarding fixed charge obligations exhibited volatility between 2020 and 2021, followed by a significant strengthening in 2022. The overall trajectory indicates a marked improvement in the capacity to meet fixed financial obligations relative to available earnings.
- Earnings before fixed charges and tax
- A fluctuation in earnings is observed, with a decline from US$ 3,350 million in 2020 to US$ 2,919 million in 2021. However, a substantial recovery occurred in 2022, where earnings rose to US$ 4,742 million, marking a significant increase in operational profitability available for debt service.
- Fixed charges
- Fixed obligations remained relatively stable over the three-year period. A slight increase to US$ 519 million was noted in 2021, which was subsequently reversed in 2022 as charges decreased to US$ 450 million. This reduction in fixed costs occurred concurrently with the rise in earnings, amplifying the improvement in the coverage margin.
- Fixed charge coverage ratio
- The coverage ratio experienced a contraction from 6.77 in 2020 to 5.62 in 2021, reflecting the combined impact of reduced earnings and higher fixed costs. By December 31, 2022, the ratio expanded sharply to 10.54. This trend demonstrates a substantial increase in the margin of safety, indicating that the entity is now significantly better positioned to cover its fixed financial commitments than in the prior two years.
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