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)
General Dynamics Corp., solvency ratios
Based on: 10-K (reporting date: 2019-12-31), 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).
Over the analyzed period, the company exhibits notable shifts in its leverage and coverage ratios, indicating changes in its financial structure and risk profile.
- Debt to Equity Ratios
- The debt to equity ratio remained stable at 0.32-0.35 from 2015 through 2017, then experienced a marked increase to 1.06 in 2018, followed by a slight decrease to 0.88 in 2019. Incorporating operating lease liabilities yields almost identical values, indicating that these liabilities have a proportionate impact on the ratio.
- Debt to Capital Ratios
- These ratios mirrored the trend of debt to equity, with stability around 0.24-0.26 initially, before jumping to 0.51 in 2018 and slightly declining to 0.47-0.50 in 2019. The inclusion of operating lease liabilities marginally increases these figures, reflecting a consistent lease-related component in the capital structure.
- Debt to Assets Ratios
- The ratio remained relatively low and stable around 0.11-0.12 through 2015-2017, then increased notably to 0.27 in 2018 and slightly decreased to 0.24-0.28 in 2019 when including operating lease liabilities. This suggests a rising reliance on debt financing amid fluctuating asset levels during these years.
- Financial Leverage
- The financial leverage ratio grew moderately from approximately 3.0 in 2015-2017 to a peak of 3.87 in 2018, followed by a decrease to 3.6 in 2019. This indicates increased use of debt relative to equity, particularly in 2018, which somewhat retraced in the following year.
- Interest Coverage Ratio
- The interest coverage ratio demonstrated a declining trend, starting at very high levels around 43-44 in 2015-2016, diminishing to 35.85 in 2017, then dropping sharply to 11.92 in 2018, and further to 9.9 in 2019. This substantial decrease reflects a reduction in earnings relative to interest obligations, implying deteriorating ability to service debt through operating income.
- Fixed Charge Coverage Ratio
- Similarly, the fixed charge coverage ratio declined steadily from 11.77 in 2015 to 6.23 in 2019, consistent with the trend observed in interest coverage. This suggests increased fixed financial obligations relative to earnings, which could indicate higher financial risk.
Overall, the data reveals a period of increased indebtedness particularly evident in 2018, accompanied by a deteriorating capacity to cover interest and fixed charges from operating earnings. These shifts point to a higher financial risk profile during the latter years analyzed, which may warrant closer monitoring or strategic response.
Debt Ratios
Coverage Ratios
Debt to Equity
General Dynamics Corp., debt to equity calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt and current portion of long-term debt | 2,920) | 973) | 2) | 900) | 501) | |
| Long-term debt, excluding current portion | 9,010) | 11,444) | 3,980) | 2,988) | 2,898) | |
| Total debt | 11,930) | 12,417) | 3,982) | 3,888) | 3,399) | |
| Shareholders’ equity | 13,577) | 11,732) | 11,435) | 10,976) | 10,738) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.88 | 1.06 | 0.35 | 0.35 | 0.32 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 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).
1 2019 Calculation
Debt to equity = Total debt ÷ Shareholders’ equity
= 11,930 ÷ 13,577 = 0.88
2 Click competitor name to see calculations.
The financial data over the period from 2015 to 2019 indicates notable shifts in the capital structure of the company.
- Total Debt
- The total debt increased steadily from 3,399 million US dollars in 2015 to 3,982 million in 2017, followed by a sharp rise in 2018 to 12,417 million. In 2019, the total debt slightly decreased to 11,930 million. This significant increase in 2018 reflects a major change in the company's financing or capital investment strategy.
- Shareholders’ Equity
- Shareholders' equity exhibited consistent growth throughout the period, rising from 10,738 million US dollars in 2015 to 13,577 million in 2019. This steady increase suggests ongoing profitability or retained earnings being reinvested in the company, contributing to its net worth.
- Debt to Equity Ratio
- The debt to equity ratio remained relatively stable around 0.32 to 0.35 from 2015 to 2017, indicating a conservative capital structure with limited leverage. However, in 2018, the ratio surged to 1.06 due to the substantial increase in total debt, suggesting a shift to a more leveraged position. Although it decreased somewhat to 0.88 in 2019, the company maintained a higher leverage level than in prior years.
Overall, the data reveals a strategic increase in debt financing starting in 2018, accompanied by continued growth in equity. This has resulted in a greater reliance on debt relative to equity, which may imply increased risk but also potential for enhanced returns, depending on the company's operational performance and deployment of the additional capital.
Debt to Equity (including Operating Lease Liability)
General Dynamics Corp., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt and current portion of long-term debt | 2,920) | 973) | 2) | 900) | 501) | |
| Long-term debt, excluding current portion | 9,010) | 11,444) | 3,980) | 2,988) | 2,898) | |
| Total debt | 11,930) | 12,417) | 3,982) | 3,888) | 3,399) | |
| Current operating lease liabilities | 252) | —) | —) | —) | —) | |
| Noncurrent operating lease liabilities | 1,251) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 13,433) | 12,417) | 3,982) | 3,888) | 3,399) | |
| Shareholders’ equity | 13,577) | 11,732) | 11,435) | 10,976) | 10,738) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 0.99 | 1.06 | 0.35 | 0.35 | 0.32 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 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).
1 2019 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Shareholders’ equity
= 13,433 ÷ 13,577 = 0.99
2 Click competitor name to see calculations.
The financial data reveals significant changes in the company's capital structure over the observed period. There is a notable increase in total debt, particularly between 2017 and 2018, where debt rose sharply from approximately 3.98 billion US dollars to over 12.4 billion US dollars. This elevated level of debt continued into 2019, reaching about 13.4 billion US dollars.
During the same period, shareholders' equity exhibited steady growth, increasing gradually from around 10.7 billion US dollars in 2015 to approximately 13.6 billion US dollars in 2019. This indicates a consistent strengthening of the company's equity base, albeit at a much slower pace than the growth in total debt.
Corresponding with the rise in total debt, the debt to equity ratio experienced a substantial increase after 2017. The ratio remained relatively stable around 0.32-0.35 from 2015 through 2017 but surged to over 1.0 by the end of 2018, slightly declining to 0.99 in 2019. This shift suggests a considerable change in financial leverage, with debt levels becoming nearly equivalent to equity by the end of the period.
Overall, the data indicates an increased reliance on debt financing starting in 2018, which has significantly altered the company's capital structure. The increase in shareholders' equity has been positive but insufficient to offset the rapid debt accumulation, leading to a higher financial leverage position.
- Total Debt
- Steady increase from 2015 to 2017 followed by a sharp rise in 2018 and further growth in 2019.
- Shareholders’ Equity
- Consistent but moderate growth over the entire five-year period.
- Debt to Equity Ratio
- Stable and low until 2017, then abrupt increase in 2018 with a slight reduction in 2019, indicating increased leverage.
Debt to Capital
General Dynamics Corp., debt to capital calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt and current portion of long-term debt | 2,920) | 973) | 2) | 900) | 501) | |
| Long-term debt, excluding current portion | 9,010) | 11,444) | 3,980) | 2,988) | 2,898) | |
| Total debt | 11,930) | 12,417) | 3,982) | 3,888) | 3,399) | |
| Shareholders’ equity | 13,577) | 11,732) | 11,435) | 10,976) | 10,738) | |
| Total capital | 25,507) | 24,149) | 15,417) | 14,864) | 14,137) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.47 | 0.51 | 0.26 | 0.26 | 0.24 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 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).
1 2019 Calculation
Debt to capital = Total debt ÷ Total capital
= 11,930 ÷ 25,507 = 0.47
2 Click competitor name to see calculations.
Over the observed five-year period, the company exhibited notable changes in its financial leverage and capital structure, as indicated by the provided metrics.
- Total Debt
- The total debt showed a moderate increase from US$3,399 million in 2015 to US$3,982 million in 2017. However, there was a significant surge in 2018, with debt rising sharply to US$12,417 million, followed by a slight decline to US$11,930 million in 2019. This marked increase in 2018 suggests a possible strategic decision to leverage the balance sheet more aggressively.
- Total Capital
- Total capital followed an upward trend throughout the entire period. It increased steadily from US$14,137 million in 2015 to US$15,417 million in 2017, then experienced a substantial jump to US$24,149 million in 2018, continuing to rise to US$25,507 million in 2019. The significant capital expansion in 2018 aligns with the increased debt levels, indicating an overall expansion of the capital base.
- Debt to Capital Ratio
- The debt to capital ratio remained relatively stable at approximately 0.24 to 0.26 during the initial three years (2015–2017), reflecting modest leverage. In 2018, the ratio nearly doubled to 0.51, evidencing a pronounced increase in debt relative to the total capital. In 2019, the ratio slightly decreased to 0.47 but remained substantially higher than in earlier years. This leverage change signifies a possible shift in financial strategy towards higher debt utilization.
In summary, the data reveals a period of conservative leverage from 2015 through 2017, followed by a marked increase in borrowing and overall capital in 2018, accompanied by a corresponding rise in leverage ratios. The partial reduction in debt-to-capital ratio in 2019 may suggest an initial move towards deleveraging, but the company maintained a significantly higher leverage position compared to the earlier years.
Debt to Capital (including Operating Lease Liability)
General Dynamics Corp., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt and current portion of long-term debt | 2,920) | 973) | 2) | 900) | 501) | |
| Long-term debt, excluding current portion | 9,010) | 11,444) | 3,980) | 2,988) | 2,898) | |
| Total debt | 11,930) | 12,417) | 3,982) | 3,888) | 3,399) | |
| Current operating lease liabilities | 252) | —) | —) | —) | —) | |
| Noncurrent operating lease liabilities | 1,251) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 13,433) | 12,417) | 3,982) | 3,888) | 3,399) | |
| Shareholders’ equity | 13,577) | 11,732) | 11,435) | 10,976) | 10,738) | |
| Total capital (including operating lease liability) | 27,010) | 24,149) | 15,417) | 14,864) | 14,137) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.50 | 0.51 | 0.26 | 0.26 | 0.24 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 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).
1 2019 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 13,433 ÷ 27,010 = 0.50
2 Click competitor name to see calculations.
- Total Debt (including operating lease liability)
- The total debt exhibited a notable upward trend over the five-year period. From 2015 to 2017, the debt increased modestly from 3,399 million US dollars to 3,982 million US dollars. However, a significant escalation occurred between 2017 and 2018 when the debt rose sharply to 12,417 million US dollars, followed by a further increase to 13,433 million US dollars in 2019.
- Total Capital (including operating lease liability)
- Total capital demonstrated a consistent growth trajectory throughout the observed years. The capital expanded gradually from 14,137 million US dollars in 2015 to 15,417 million US dollars in 2017. Subsequently, a substantial increase was observed in 2018, with total capital reaching 24,149 million US dollars, continuing to ascend to 27,010 million US dollars in 2019. This pattern suggests increased investment or financing activities over time.
- Debt to Capital Ratio (including operating lease liability)
- The debt to capital ratio remained relatively stable at approximately 0.24 to 0.26 during 2015 to 2017, indicating a balanced capital structure with moderate leverage. Starting in 2018, this ratio almost doubled to 0.51 and slightly decreased to 0.50 in 2019. This shift reflects an increased reliance on debt financing relative to the company's overall capital structure in the latter years, corresponding to the sharp increases in total debt and total capital.
Debt to Assets
General Dynamics Corp., debt to assets calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt and current portion of long-term debt | 2,920) | 973) | 2) | 900) | 501) | |
| Long-term debt, excluding current portion | 9,010) | 11,444) | 3,980) | 2,988) | 2,898) | |
| Total debt | 11,930) | 12,417) | 3,982) | 3,888) | 3,399) | |
| Total assets | 48,841) | 45,408) | 35,046) | 32,872) | 31,997) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.24 | 0.27 | 0.11 | 0.12 | 0.11 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 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).
1 2019 Calculation
Debt to assets = Total debt ÷ Total assets
= 11,930 ÷ 48,841 = 0.24
2 Click competitor name to see calculations.
The financial data reveals significant trends in the company's debt and asset management over the five-year period ending December 31, 2019.
- Total Debt
-
Total debt experienced moderate growth from 2015 through 2017, increasing from 3,399 million USD to 3,982 million USD. However, a sharp rise is observable in 2018, where total debt surged to 12,417 million USD, representing more than a threefold increase compared to the previous year. In 2019, total debt slightly decreased to 11,930 million USD but remained substantially higher than in the earlier years of the period.
- Total Assets
-
Total assets showed a steady upward trajectory throughout the period, growing from 31,997 million USD in 2015 to 48,841 million USD in 2019. The increase was gradual from 2015 to 2017 but became more pronounced in 2018 and 2019, coinciding with the period of increased debt. The asset base expanded approximately 52.6% over the five years.
- Debt to Assets Ratio
-
The debt to assets ratio remained relatively stable and low, around 0.11 to 0.12, from 2015 through 2017. In 2018, this ratio sharply increased to 0.27, reflecting the substantial rise in total debt relative to assets. By 2019, the ratio slightly decreased to 0.24 but stayed significantly elevated compared to the earlier years, indicating a higher leverage position.
Overall, the company maintained a conservative leverage profile through 2017, but undertook considerable additional borrowing starting in 2018, as evidenced by the significant increase in total debt and corresponding rise in the debt to assets ratio. Despite this increase in leverage, total assets also expanded notably, suggesting potential asset acquisitions or investments funded partly through debt. The elevated debt levels and higher leverage ratio in the final two years warrant attention in terms of debt servicing capability and risk management going forward.
Debt to Assets (including Operating Lease Liability)
General Dynamics Corp., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt and current portion of long-term debt | 2,920) | 973) | 2) | 900) | 501) | |
| Long-term debt, excluding current portion | 9,010) | 11,444) | 3,980) | 2,988) | 2,898) | |
| Total debt | 11,930) | 12,417) | 3,982) | 3,888) | 3,399) | |
| Current operating lease liabilities | 252) | —) | —) | —) | —) | |
| Noncurrent operating lease liabilities | 1,251) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 13,433) | 12,417) | 3,982) | 3,888) | 3,399) | |
| Total assets | 48,841) | 45,408) | 35,046) | 32,872) | 31,997) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.28 | 0.27 | 0.11 | 0.12 | 0.11 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 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).
1 2019 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 13,433 ÷ 48,841 = 0.28
2 Click competitor name to see calculations.
The financial data reveals several notable trends over the five-year period ending December 31, 2019. A significant increase in total debt is observed, rising from 3,399 million US dollars in 2015 to 13,433 million US dollars by 2019. This marks nearly a fourfold increase in the company's debt load within this timeframe.
Concurrently, total assets also demonstrate growth, increasing from 31,997 million US dollars in 2015 to 48,841 million US dollars in 2019. This growth, although substantial, is proportionally less pronounced compared to the rise in total debt.
The debt to assets ratio, which provides an indication of the company's leverage, remains relatively stable and low from 2015 through 2017, fluctuating marginally between 0.11 and 0.12. However, a marked upward shift occurs in 2018, where the ratio more than doubles to 0.27 and slightly increases further to 0.28 in 2019. This sharp rise suggests an increasing reliance on debt financing relative to the company’s asset base in the latter years.
Overall, the increasing levels of debt alongside growing assets indicate a strategic shift towards greater leverage. The rising debt to assets ratio highlights potential shifts in financial risk profile that might warrant closer monitoring in subsequent periods.
Financial Leverage
General Dynamics Corp., financial leverage calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 48,841) | 45,408) | 35,046) | 32,872) | 31,997) | |
| Shareholders’ equity | 13,577) | 11,732) | 11,435) | 10,976) | 10,738) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 3.60 | 3.87 | 3.06 | 2.99 | 2.98 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 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).
1 2019 Calculation
Financial leverage = Total assets ÷ Shareholders’ equity
= 48,841 ÷ 13,577 = 3.60
2 Click competitor name to see calculations.
The analysis of the presented financial data reveals several notable trends over the five-year period.
- Total Assets
- Total assets show a consistent upward trajectory from 31,997 million US dollars in 2015 to 48,841 million US dollars in 2019. The growth accelerated particularly between 2017 and 2018, where assets increased significantly by approximately 29.6%, indicating substantial investment or asset acquisition during that period.
- Shareholders’ Equity
- Shareholders' equity also exhibited steady growth, rising from 10,738 million US dollars in 2015 to 13,577 million US dollars in 2019. The increase is relatively moderate and stable compared to total assets, with the most notable rise occurring between 2018 and 2019. This suggests continued retention of earnings or capital injection supporting the equity base.
- Financial Leverage
- Financial leverage, defined as the ratio of total assets to shareholders’ equity, remained relatively stable around 3.0 from 2015 to 2017. However, there was a sharp increase to 3.87 in 2018, indicating the company significantly increased its reliance on debt or other liabilities relative to equity. In 2019, this ratio decreased somewhat to 3.6 but remained elevated compared to earlier years, suggesting a sustained higher level of leverage.
Overall, the company demonstrates asset growth outpacing equity growth, particularly evident in 2018. The spike in financial leverage indicates increased use of debt financing during this period, followed by a slight deleveraging in 2019. The trends suggest a strategy focused on expansion potentially supported by higher leverage, balanced by gradual strengthening of the equity base over time.
Interest Coverage
General Dynamics Corp., interest coverage calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings | 3,484) | 3,345) | 2,912) | 2,955) | 2,965) | |
| Less: Discontinued operations, net of tax | —) | (13) | —) | (107) | —) | |
| Add: Income tax expense | 718) | 727) | 1,165) | 1,169) | 1,137) | |
| Add: Interest expense | 472) | 374) | 117) | 99) | 98) | |
| Earnings before interest and tax (EBIT) | 4,674) | 4,459) | 4,194) | 4,330) | 4,200) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 9.90 | 11.92 | 35.85 | 43.74 | 42.86 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 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).
1 2019 Calculation
Interest coverage = EBIT ÷ Interest expense
= 4,674 ÷ 472 = 9.90
2 Click competitor name to see calculations.
- Earnings Before Interest and Tax (EBIT)
- The EBIT values exhibit a generally increasing trend from 2015 to 2019, starting at 4,200 million US dollars in 2015 and rising to 4,674 million US dollars in 2019. Although there was a slight decrease from 2016 to 2017, the overall trajectory is upward, showing growth and improved profitability over the five-year period.
- Interest Expense
- Interest expense remained relatively stable from 2015 through 2017, fluctuating marginally between 98 and 117 million US dollars. However, from 2017 onwards, there was a significant increase in interest expenses, reaching 374 million US dollars in 2018 and further rising to 472 million US dollars in 2019. This indicates a notable rise in financing costs or debt levels during the latter part of the period.
- Interest Coverage Ratio
- The interest coverage ratio, which measures the ability to meet interest obligations from operating earnings, demonstrates a marked decline over the timeframe. Starting from a robust 42.86 in 2015 and maintaining high levels through 2016 and 2017, the ratio sharply decreased in 2018 to 11.92 and further to 9.9 in 2019. This decline reflects the rising interest expenses combined with relatively moderate EBIT growth, signaling reduced coverage of interest burdens and potentially increased financial risk.
Fixed Charge Coverage
General Dynamics Corp., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings | 3,484) | 3,345) | 2,912) | 2,955) | 2,965) | |
| Less: Discontinued operations, net of tax | —) | (13) | —) | (107) | —) | |
| Add: Income tax expense | 718) | 727) | 1,165) | 1,169) | 1,137) | |
| Add: Interest expense | 472) | 374) | 117) | 99) | 98) | |
| Earnings before interest and tax (EBIT) | 4,674) | 4,459) | 4,194) | 4,330) | 4,200) | |
| Add: Operating lease cost | 332) | 380) | 309) | 307) | 283) | |
| Earnings before fixed charges and tax | 5,006) | 4,839) | 4,503) | 4,637) | 4,483) | |
| Interest expense | 472) | 374) | 117) | 99) | 98) | |
| Operating lease cost | 332) | 380) | 309) | 307) | 283) | |
| Fixed charges | 804) | 754) | 426) | 406) | 381) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 6.23 | 6.42 | 10.57 | 11.42 | 11.77 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 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).
1 2019 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 5,006 ÷ 804 = 6.23
2 Click competitor name to see calculations.
- Earnings before fixed charges and tax
- The earnings before fixed charges and tax demonstrate an overall increasing trend from 2015 through 2019. Starting at 4,483 million US dollars in 2015, the value slightly increased to 4,637 million in 2016, but then experienced a minor decline to 4,503 million in 2017. Subsequently, there was consistent growth in 2018 and 2019, reaching 4,839 million and 5,006 million respectively, indicating expanding operating profitability before accounting for fixed charges.
- Fixed charges
- Fixed charges rose steadily over the period under review. Commencing at 381 million US dollars in 2015, these charges increased each year, reaching 406 million in 2016 and 426 million in 2017. Thereafter, a more pronounced jump occurred, with fixed charges climbing to 754 million in 2018 and slightly further to 804 million in 2019. This significant increase, particularly from 2017 onward, suggests either higher debt servicing costs or increased lease obligations.
- Fixed charge coverage ratio
- The fixed charge coverage ratio exhibits a declining trend from 2015 through 2019. It began at a strong 11.77 in 2015, indicating very high ability to cover fixed charges with earnings. Over the following years, a gradual decrease was observed, falling to 11.42 in 2016 and 10.57 in 2017. The decline became more pronounced in 2018 and 2019, with the ratio dropping to 6.42 and then 6.23. This reduction reflects the higher fixed charges incurred relative to earnings, signaling a weakening of the margin of safety in covering these obligations.