Microsoft Excel LibreOffice Calc

Long-term Debt and Solvency Analysis

Difficulty: Beginner

Solvency ratios also known as long-term debt ratios measure a company's ability to meet long-term obligations.


Ratios (Summary)

Caterpillar Inc., debt and solvency ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Debt to equity 2.55 2.80 2.57 2.35 1.81
Debt to capital 0.72 0.74 0.72 0.70 0.64
Interest coverage 8.72 1.26 6.63 11.52 12.02

Source: Based on data from Caterpillar Inc. Annual Reports

Ratio Description The company
Debt-to-equity ratio A solvency ratio calculated as total debt divided by total shareholders' equity. Caterpillar Inc.'s debt-to-equity ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.
Debt-to-capital ratio A solvency ratio calculated as total debt divided by total debt plus shareholders' equity. Caterpillar Inc.'s debt-to-capital ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.
Interest coverage ratio A solvency ratio calculated as EBIT divided by interest payments. Caterpillar Inc.'s interest coverage ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

Debt to Equity

Caterpillar Inc., debt to equity calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Short-term borrowings 4,837  7,303  6,967  4,708  3,679 
Long-term debt due within one year 6,194  6,662  5,879  6,793  7,352 
Long-term debt due after one year 23,847  22,818  25,247  27,784  26,719 
Total debt 34,878  36,783  38,093  39,285  37,750 
Equity attributable to common stockholders 13,697  13,137  14,809  16,746  20,811 
Ratio
Debt to equity1 2.55 2.80 2.57 2.35 1.81
Benchmarks
Debt to Equity, Competitors
Illinois Tool Works Inc. 1.82 1.84 1.42 1.09 0.65
Debt to Equity, Sector
Industrial Engineering 2.36 2.57 2.27 1.98 1.45
Debt to Equity, Industry
Industrials 1.36 1.31 1.30 1.50 1.39

Source: Based on data from Caterpillar Inc. Annual Reports

2017 Calculations

1 Debt to equity = Total debt ÷ Equity attributable to common stockholders
= 34,878 ÷ 13,697 = 2.55

Ratio Description The company
Debt-to-equity ratio A solvency ratio calculated as total debt divided by total shareholders' equity. Caterpillar Inc.'s debt-to-equity ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

Debt to Capital

Caterpillar Inc., debt to capital calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Short-term borrowings 4,837  7,303  6,967  4,708  3,679 
Long-term debt due within one year 6,194  6,662  5,879  6,793  7,352 
Long-term debt due after one year 23,847  22,818  25,247  27,784  26,719 
Total debt 34,878  36,783  38,093  39,285  37,750 
Equity attributable to common stockholders 13,697  13,137  14,809  16,746  20,811 
Total capital 48,575  49,920  52,902  56,031  58,561 
Ratio
Debt to capital1 0.72 0.74 0.72 0.70 0.64
Benchmarks
Debt to Capital, Competitors
Illinois Tool Works Inc. 0.64 0.65 0.59 0.52 0.40
Debt to Capital, Sector
Industrial Engineering 0.70 0.72 0.69 0.66 0.59
Debt to Capital, Industry
Industrials 0.58 0.57 0.56 0.60 0.58

Source: Based on data from Caterpillar Inc. Annual Reports

2017 Calculations

1 Debt to capital = Total debt ÷ Total capital
= 34,878 ÷ 48,575 = 0.72

Ratio Description The company
Debt-to-capital ratio A solvency ratio calculated as total debt divided by total debt plus shareholders' equity. Caterpillar Inc.'s debt-to-capital ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

Interest Coverage

Caterpillar Inc., interest coverage calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Profit (loss) attributable to common stockholders 754  (67) 2,102  3,695  3,789 
Add: Net income attributable to noncontrolling interest 11  16  14 
Add: Income tax expense 3,339  192  742  1,380  1,319 
Add: Interest expense excluding Financial Products 531  505  507  484  465 
Earnings before interest and tax (EBIT) 4,629  638  3,362  5,575  5,587 
Ratio
Interest coverage1 8.72 1.26 6.63 11.52 12.02
Benchmarks
Interest Coverage, Competitors
Illinois Tool Works Inc. 13.58 13.27 13.03 11.80 10.82
Interest Coverage, Sector
Industrial Engineering 10.31 5.10 8.60 11.61 11.61
Interest Coverage, Industry
Industrials 7.95 8.24 10.83 7.76 7.15

Source: Based on data from Caterpillar Inc. Annual Reports

2017 Calculations

1 Interest coverage = EBIT ÷ Interest expense
= 4,629 ÷ 531 = 8.72

Ratio Description The company
Interest coverage ratio A solvency ratio calculated as EBIT divided by interest payments. Caterpillar Inc.'s interest coverage ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.