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
EMC Corp., solvency ratios
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
The solvency profile exhibits a period of initial deleveraging followed by a gradual increase in debt reliance and a corresponding decline in coverage margins between 2011 and 2015. While the company maintains relatively low debt ratios compared to its asset and equity base, the trend suggests an increasing appetite for leverage and a narrowing cushion for meeting fixed financial obligations.
- Debt Utilization Ratios
- Debt to equity, debt to capital, and debt to assets all experienced a significant contraction in 2012, reaching their lowest points across the observed period. However, a reversal occurred in 2013, with these ratios rising and remaining elevated through 2015. Debt to equity increased from 0.17 in 2011 to 0.32 by the end of 2015, indicating a shift toward a more leveraged capital structure.
- Financial Leverage
- A consistent upward trend is observed in financial leverage after 2012. The ratio rose steadily from 1.70 in 2012 to 2.20 in 2015, reflecting an increasing proportion of debt used to finance the company's total assets.
- Coverage Ratios
- Interest coverage and fixed charge coverage both peaked in 2012, with interest coverage reaching 49.21. Subsequently, a general downward trajectory was established. Fixed charge coverage declined from its peak of 10.74 in 2012 to 5.69 in 2015, representing a reduction in the company's capacity to cover its fixed costs from operating earnings.
Overall, the financial position transitioned from a highly conservative state in 2012 to a more leveraged position by 2015. The convergence of rising leverage ratios and falling coverage ratios indicates an increase in the company's financial risk profile over the final three years of the analysis.
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Debt to Equity
EMC Corp., debt to equity calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Notes converted and payable | —) | —) | 1,665) | —) | 1,700) | |
| Short-term debt | 1,299) | —) | —) | —) | —) | |
| Current portion of convertible debt | —) | —) | —) | 1,652) | 1,605) | |
| Long-term debt | 5,475) | 5,495) | 5,494) | —) | —) | |
| Total debt | 6,774) | 5,495) | 7,159) | 1,652) | 3,305) | |
| Total EMC Corporation’s shareholders’ equity | 21,140) | 21,896) | 22,301) | 22,357) | 18,959) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.32 | 0.25 | 0.32 | 0.07 | 0.17 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Advanced Micro Devices Inc. | — | — | — | — | — | |
| Analog Devices Inc. | — | — | — | — | — | |
| Applied Materials Inc. | — | — | — | — | — | |
| Broadcom Inc. | — | — | — | — | — | |
| Intel Corp. | — | — | — | — | — | |
| KLA Corp. | — | — | — | — | — | |
| Lam Research Corp. | — | — | — | — | — | |
| Marvell Technology Inc. | — | — | — | — | — | |
| Micron Technology Inc. | — | — | — | — | — | |
| NVIDIA Corp. | — | — | — | — | — | |
| Qualcomm Inc. | — | — | — | — | — | |
| Texas Instruments Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Debt to equity = Total debt ÷ Total EMC Corporation’s shareholders’ equity
= 6,774 ÷ 21,140 = 0.32
2 Click competitor name to see calculations.
The solvency profile of the organization between 2011 and 2015 is characterized by significant volatility in debt levels contrasted with a relatively stable equity base. The fluctuations in the debt-to-equity ratio are primarily driven by shifts in total borrowing rather than structural changes in shareholders' equity.
- Total Debt Volatility
- Total debt experienced substantial swings during the analyzed period. A sharp reduction occurred between 2011 and 2012, where debt fell from 3,305 million USD to 1,652 million USD. This was followed by a significant increase in 2013, reaching a peak of 7,159 million USD. Subsequent years showed continued instability, with a decrease to 5,495 million USD in 2014 and a subsequent rise to 6,774 million USD by the end of 2015.
- Shareholders' Equity Trends
- Shareholders' equity demonstrated a more consistent trajectory. There was a notable increase from 18,959 million USD in 2011 to a peak of 22,357 million USD in 2012. From 2013 through 2015, equity entered a period of gradual decline, ending the period at 21,140 million USD. This indicates that while debt levels shifted aggressively, the equity cushion remained substantial and relatively steady.
- Debt to Equity Ratio Analysis
- The debt to equity ratio directly mirrored the volatility of the total debt. The ratio reached its lowest point of 0.07 in 2012, reflecting the simultaneous dip in debt and peak in equity. However, the ratio surged to 0.32 in 2013 following the spike in borrowing. After a moderate correction to 0.25 in 2014, the ratio returned to 0.32 in 2015. Despite these fluctuations, the ratio remained below 0.35 throughout the period, suggesting a conservative overall leverage position relative to the equity base.
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Debt to Capital
EMC Corp., debt to capital calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Notes converted and payable | —) | —) | 1,665) | —) | 1,700) | |
| Short-term debt | 1,299) | —) | —) | —) | —) | |
| Current portion of convertible debt | —) | —) | —) | 1,652) | 1,605) | |
| Long-term debt | 5,475) | 5,495) | 5,494) | —) | —) | |
| Total debt | 6,774) | 5,495) | 7,159) | 1,652) | 3,305) | |
| Total EMC Corporation’s shareholders’ equity | 21,140) | 21,896) | 22,301) | 22,357) | 18,959) | |
| Total capital | 27,914) | 27,391) | 29,460) | 24,010) | 22,264) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.24 | 0.20 | 0.24 | 0.07 | 0.15 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Advanced Micro Devices Inc. | — | — | — | — | — | |
| Analog Devices Inc. | — | — | — | — | — | |
| Applied Materials Inc. | — | — | — | — | — | |
| Broadcom Inc. | — | — | — | — | — | |
| Intel Corp. | — | — | — | — | — | |
| KLA Corp. | — | — | — | — | — | |
| Lam Research Corp. | — | — | — | — | — | |
| Marvell Technology Inc. | — | — | — | — | — | |
| Micron Technology Inc. | — | — | — | — | — | |
| NVIDIA Corp. | — | — | — | — | — | |
| Qualcomm Inc. | — | — | — | — | — | |
| Texas Instruments Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Debt to capital = Total debt ÷ Total capital
= 6,774 ÷ 27,914 = 0.24
2 Click competitor name to see calculations.
Between 2011 and 2015, the debt to capital ratio exhibited significant volatility, characterized by a sharp initial decline followed by a substantial increase and subsequent stabilization. The overall trend indicates a shift toward a higher reliance on debt relative to total capital after 2012.
- Debt to Capital Ratio Fluctuations
- The ratio reached a five-year low of 0.07 in 2012, having decreased from 0.15 in 2011. A sharp increase occurred in 2013, where the ratio surged to 0.24. Following a slight correction to 0.20 in 2014, the ratio returned to 0.24 by the end of 2015.
- Total Debt Trends
- Total debt experienced extreme variance during the period. A reduction from US$ 3,305 million in 2011 to US$ 1,652 million in 2012 was followed by a rapid escalation to US$ 7,159 million in 2013. While debt decreased to US$ 5,495 million in 2014, it rose again to US$ 6,774 million in 2015.
- Total Capital Base
- Total capital showed a general upward trajectory from 2011 to 2013, growing from US$ 22,264 million to a peak of US$ 29,460 million. The capital base remained relatively stable in the subsequent two years, ending the period at US$ 27,914 million in 2015.
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Debt to Assets
EMC Corp., debt to assets calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Notes converted and payable | —) | —) | 1,665) | —) | 1,700) | |
| Short-term debt | 1,299) | —) | —) | —) | —) | |
| Current portion of convertible debt | —) | —) | —) | 1,652) | 1,605) | |
| Long-term debt | 5,475) | 5,495) | 5,494) | —) | —) | |
| Total debt | 6,774) | 5,495) | 7,159) | 1,652) | 3,305) | |
| Total assets | 46,612) | 45,885) | 45,849) | 38,069) | 34,268) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.15 | 0.12 | 0.16 | 0.04 | 0.10 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Advanced Micro Devices Inc. | — | — | — | — | — | |
| Analog Devices Inc. | — | — | — | — | — | |
| Applied Materials Inc. | — | — | — | — | — | |
| Broadcom Inc. | — | — | — | — | — | |
| Intel Corp. | — | — | — | — | — | |
| KLA Corp. | — | — | — | — | — | |
| Lam Research Corp. | — | — | — | — | — | |
| Marvell Technology Inc. | — | — | — | — | — | |
| Micron Technology Inc. | — | — | — | — | — | |
| NVIDIA Corp. | — | — | — | — | — | |
| Qualcomm Inc. | — | — | — | — | — | |
| Texas Instruments Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Debt to assets = Total debt ÷ Total assets
= 6,774 ÷ 46,612 = 0.15
2 Click competitor name to see calculations.
The analysis of the solvency position between 2011 and 2015 reveals a period of volatility in leverage accompanying a steady expansion of the asset base. Total assets grew consistently from 34,268 million US$ in 2011 to 46,612 million US$ in 2015, indicating a general increase in the scale of the balance sheet.
- Total Asset Growth
- A consistent upward trend in total assets is observed throughout the period, with the most significant expansion occurring between 2012 and 2013, where assets increased from 38,069 million US$ to 45,849 million US$. Growth decelerated in 2014 and 2015, remaining relatively stable near the 46 billion US$ mark.
- Debt Level Fluctuations
- Total debt exhibited substantial instability. A notable decrease occurred in 2012, dropping to 1,652 million US$, which was followed by a sharp increase in 2013 to a peak of 7,159 million US$. Debt levels continued to fluctuate in subsequent years, ending the period at 6,774 million US$ in 2015.
- Debt to Assets Ratio Interpretation
- The debt to assets ratio mirrors the volatility of the total debt figures. The ratio reached its lowest point of 0.04 in 2012 and its peak of 0.16 in 2013. While the ratio increased from its 2012 low, it remained within a range of 0.04 to 0.16, suggesting that total debt consistently represented a minority portion of the overall asset base throughout the analyzed timeframe.
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Financial Leverage
EMC Corp., financial leverage calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 46,612) | 45,885) | 45,849) | 38,069) | 34,268) | |
| Total EMC Corporation’s shareholders’ equity | 21,140) | 21,896) | 22,301) | 22,357) | 18,959) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 2.20 | 2.10 | 2.06 | 1.70 | 1.81 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Advanced Micro Devices Inc. | — | — | — | — | — | |
| Analog Devices Inc. | — | — | — | — | — | |
| Applied Materials Inc. | — | — | — | — | — | |
| Broadcom Inc. | — | — | — | — | — | |
| Intel Corp. | — | — | — | — | — | |
| KLA Corp. | — | — | — | — | — | |
| Lam Research Corp. | — | — | — | — | — | |
| Marvell Technology Inc. | — | — | — | — | — | |
| Micron Technology Inc. | — | — | — | — | — | |
| NVIDIA Corp. | — | — | — | — | — | |
| Qualcomm Inc. | — | — | — | — | — | |
| Texas Instruments Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Financial leverage = Total assets ÷ Total EMC Corporation’s shareholders’ equity
= 46,612 ÷ 21,140 = 2.20
2 Click competitor name to see calculations.
An analysis of the solvency position between 2011 and 2015 reveals a period of asset expansion financed increasingly through debt rather than equity. While total assets exhibited consistent growth, shareholders' equity plateaued and subsequently declined, resulting in a steady escalation of the financial leverage ratio after 2012.
- Total Asset Growth
- Total assets increased from US$ 34,268 million in 2011 to US$ 46,612 million in 2015. This trajectory indicates a significant and continuous expansion of the balance sheet over the five-year period.
- Shareholders' Equity Trends
- Equity grew from US$ 18,959 million in 2011 to a peak of US$ 22,357 million in 2012. Following this peak, equity values entered a period of gradual contraction, declining to US$ 21,140 million by the end of 2015.
- Financial Leverage Progression
- The financial leverage ratio initially decreased from 1.81 in 2011 to 1.70 in 2012, reflecting the initial growth in equity. However, from 2013 onward, the ratio rose consistently, moving from 2.06 to 2.20 by 2015. This pattern demonstrates an increasing reliance on liabilities to fund asset growth, which elevates the company's long-term financial risk profile.
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Interest Coverage
EMC Corp., interest coverage calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to EMC Corporation | 1,990) | 2,714) | 2,889) | 2,733) | 2,461) | |
| Add: Net income attributable to noncontrolling interest | 182) | 180) | 204) | 153) | 148) | |
| Add: Income tax expense | 710) | 868) | 772) | 918) | 640) | |
| Add: Interest expense | 164) | 147) | 156) | 79) | 170) | |
| Earnings before interest and tax (EBIT) | 3,046) | 3,909) | 4,021) | 3,883) | 3,420) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 18.57 | 26.59 | 25.78 | 49.21 | 20.06 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Advanced Micro Devices Inc. | — | — | — | — | — | |
| Analog Devices Inc. | — | — | — | — | — | |
| Applied Materials Inc. | — | — | — | — | — | |
| Broadcom Inc. | — | — | — | — | — | |
| Intel Corp. | — | — | — | — | — | |
| KLA Corp. | — | — | — | — | — | |
| Lam Research Corp. | — | — | — | — | — | |
| Marvell Technology Inc. | — | — | — | — | — | |
| Micron Technology Inc. | — | — | — | — | — | |
| NVIDIA Corp. | — | — | — | — | — | |
| Qualcomm Inc. | — | — | — | — | — | |
| Texas Instruments Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Interest coverage = EBIT ÷ Interest expense
= 3,046 ÷ 164 = 18.57
2 Click competitor name to see calculations.
The interest coverage analysis for the period between 2011 and 2015 indicates a strong overall capacity to service debt obligations, although a notable decline in solvency margins is observed toward the end of the period.
- Earnings Before Interest and Tax (EBIT) Trends
- Operating profitability experienced an upward trajectory from 2011 to 2013, peaking at US$ 4,021 million. However, this growth reversed in 2014 and accelerated in 2015, where EBIT fell to US$ 3,046 million, representing the lowest operating income level within the five-year window.
- Interest Expense Fluctuations
- Interest costs exhibited significant volatility. A substantial reduction occurred in 2012, with expenses dropping to US$ 79 million from US$ 170 million in 2011. This was followed by a correction in 2013 and 2014, and a subsequent increase to US$ 164 million by the end of 2015.
- Interest Coverage Ratio Analysis
- The interest coverage ratio reached a peak of 49.21 in 2012, driven by the simultaneous increase in EBIT and the sharp decrease in interest expenses. Following this peak, the ratio normalized to approximately 26 in 2013 and 2014. By 2015, the ratio declined to 18.57, reflecting the combined impact of diminished operating earnings and rising interest costs.
While the coverage ratio remains well above the critical threshold of 1.0, the downward trend observed in 2015 suggests a contraction in the margin of safety available to cover interest payments from operating profits.
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Fixed Charge Coverage
EMC Corp., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to EMC Corporation | 1,990) | 2,714) | 2,889) | 2,733) | 2,461) | |
| Add: Net income attributable to noncontrolling interest | 182) | 180) | 204) | 153) | 148) | |
| Add: Income tax expense | 710) | 868) | 772) | 918) | 640) | |
| Add: Interest expense | 164) | 147) | 156) | 79) | 170) | |
| Earnings before interest and tax (EBIT) | 3,046) | 3,909) | 4,021) | 3,883) | 3,420) | |
| Add: Rent expense | 451) | 361) | 328) | 312) | 309) | |
| Earnings before fixed charges and tax | 3,497) | 4,270) | 4,349) | 4,194) | 3,728) | |
| Interest expense | 164) | 147) | 156) | 79) | 170) | |
| Rent expense | 451) | 361) | 328) | 312) | 309) | |
| Fixed charges | 615) | 508) | 484) | 391) | 479) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 5.69 | 8.41 | 8.99 | 10.74 | 7.78 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Advanced Micro Devices Inc. | — | — | — | — | — | |
| Analog Devices Inc. | — | — | — | — | — | |
| Applied Materials Inc. | — | — | — | — | — | |
| Broadcom Inc. | — | — | — | — | — | |
| Intel Corp. | — | — | — | — | — | |
| KLA Corp. | — | — | — | — | — | |
| Lam Research Corp. | — | — | — | — | — | |
| Marvell Technology Inc. | — | — | — | — | — | |
| NVIDIA Corp. | — | — | — | — | — | |
| Qualcomm Inc. | — | — | — | — | — | |
| Texas Instruments Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 3,497 ÷ 615 = 5.69
2 Click competitor name to see calculations.
The solvency profile of the company exhibits a period of strength followed by a notable contraction in its capacity to meet fixed obligations between 2011 and 2015. While the coverage remained well above a critical threshold throughout the period, the trend shifted from expansion to a steady decline after 2012.
- Earnings Before Fixed Charges and Tax
- Operating earnings showed an initial upward trajectory, increasing from US$ 3,728 million in 2011 to a peak of US$ 4,349 million in 2013. However, this growth reversed in the subsequent two years, culminating in a significant decrease to US$ 3,497 million by December 31, 2015, representing the lowest earnings level within the analyzed timeframe.
- Fixed Charges
- Fixed obligations remained relatively stable between 2011 and 2014, with a brief dip to US$ 391 million in 2012. A consistent upward trend emerged starting in 2013, with charges rising to US$ 615 million by 2015. This increase in fixed costs coincided with the decline in earnings, creating a compounding negative effect on solvency margins.
- Fixed Charge Coverage Ratio
- The coverage ratio peaked in 2012 at 10.74, driven by the simultaneous increase in earnings and the reduction of fixed charges. Following this peak, the ratio entered a period of continuous erosion, falling to 8.99 in 2013 and 8.41 in 2014. The most sharp decline occurred in 2015, where the ratio dropped to 5.69, indicating a reduction in the margin of safety available to cover fixed financial commitments.
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