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
General Mills Inc., solvency ratios
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
Between 2014 and 2019, a general increase in solvency risk is observed, characterized by rising leverage ratios that peaked in 2018 and a concurrent decline in debt coverage capacity. The analyzed period shows a strategic shift toward higher indebtedness, followed by a moderate reduction in leverage in the final year.
- Capital Structure and Debt Ratios
- A consistent upward trend in debt accumulation is evident through May 2018. The debt to equity ratio rose from 1.34 in 2014 to a peak of 2.58 in 2018, before declining to 2.05 in 2019. This trend is mirrored in the debt to capital ratio, which increased from 0.57 to 0.72 over the same period, and the debt to assets ratio, which grew from 0.38 to a high of 0.52 in 2018. These movements indicate that a larger portion of the asset base and capital structure was financed through debt during this timeframe.
- Financial Leverage
- Financial leverage experienced significant growth, rising from 3.54 in 2014 to a peak of 5.04 in 2017. While it remained elevated at 4.99 in 2018, a notable contraction occurred by May 2019, with the ratio falling to 4.27. This suggests an effort to reduce the reliance on borrowed funds to amplify equity returns toward the end of the period.
- Debt Service Coverage
- A deterioration in the ability to service debt is observed across both coverage metrics. The interest coverage ratio declined from 9.62 in 2014 to 5.08 in 2019, despite a temporary recovery in 2016. Similarly, the fixed charge coverage ratio moved from 6.41 in 2014 to 4.02 in 2019. The downward trajectory of these ratios indicates a narrowing margin of safety for meeting fixed financial obligations.
The combination of increasing leverage through 2018 and a steady decline in coverage ratios suggests an overall increase in the company's financial risk profile, as the capacity to cover interest and fixed charges diminished while the total debt burden grew.
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Debt to Equity
General Mills Inc., debt to equity calculation, comparison to benchmarks
| May 26, 2019 | May 27, 2018 | May 28, 2017 | May 29, 2016 | May 31, 2015 | May 25, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Current portion of long-term debt | 1,396,500) | 1,600,100) | 604,700) | 1,103,400) | 1,000,400) | 1,250,600) | |
| Notes payable | 1,468,700) | 1,549,800) | 1,234,100) | 269,800) | 615,800) | 1,111,700) | |
| Long-term debt, excluding current portion | 11,624,800) | 12,668,700) | 7,642,900) | 7,057,700) | 7,607,700) | 6,423,500) | |
| Total debt | 14,490,000) | 15,818,600) | 9,481,700) | 8,430,900) | 9,223,900) | 8,785,800) | |
| Stockholders’ equity | 7,054,500) | 6,141,100) | 4,327,900) | 4,930,200) | 4,996,700) | 6,534,800) | |
| Solvency Ratio | |||||||
| Debt to equity1 | 2.05 | 2.58 | 2.19 | 1.71 | 1.85 | 1.34 | |
| Benchmarks | |||||||
| Debt to Equity, Competitors2 | |||||||
| Coca-Cola Co. | — | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
1 2019 Calculation
Debt to equity = Total debt ÷ Stockholders’ equity
= 14,490,000 ÷ 7,054,500 = 2.05
2 Click competitor name to see calculations.
An analysis of solvency ratios from May 2014 to May 2019 indicates a general increase in financial leverage, characterized by a significant peak in 2018 followed by a partial correction. The overall trajectory reflects a shift toward a more debt-reliant capital structure compared to the baseline in 2014.
- Total Debt Trends
- Debt levels remained relatively stable between 2014 and 2017, fluctuating between 8.4 billion and 9.5 billion US dollars. A substantial increase occurred in May 2018, where total debt rose to 15.8 billion US dollars, representing the highest point in the period. By May 2019, a moderate reduction to 14.5 billion US dollars was observed.
- Stockholders' Equity Trends
- A consistent decline in stockholders' equity was observed from 2014 to 2017, falling from 6.5 billion to 4.3 billion US dollars. This downward trend reversed in 2018 and 2019, with equity increasing to 6.1 billion and 7.1 billion US dollars, respectively, indicating a strengthening of the equity base in the final two years of the period.
- Debt to Equity Ratio Analysis
- The debt to equity ratio escalated from 1.34 in 2014 to a peak of 2.58 in 2018. This expansion of leverage was driven by the simultaneous erosion of equity between 2014 and 2017 and the sharp increase in borrowing in 2018. The ratio moderated to 2.05 by May 2019, resulting from the combined effect of decreasing total debt and increasing stockholders' equity.
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Debt to Capital
General Mills Inc., debt to capital calculation, comparison to benchmarks
| May 26, 2019 | May 27, 2018 | May 28, 2017 | May 29, 2016 | May 31, 2015 | May 25, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Current portion of long-term debt | 1,396,500) | 1,600,100) | 604,700) | 1,103,400) | 1,000,400) | 1,250,600) | |
| Notes payable | 1,468,700) | 1,549,800) | 1,234,100) | 269,800) | 615,800) | 1,111,700) | |
| Long-term debt, excluding current portion | 11,624,800) | 12,668,700) | 7,642,900) | 7,057,700) | 7,607,700) | 6,423,500) | |
| Total debt | 14,490,000) | 15,818,600) | 9,481,700) | 8,430,900) | 9,223,900) | 8,785,800) | |
| Stockholders’ equity | 7,054,500) | 6,141,100) | 4,327,900) | 4,930,200) | 4,996,700) | 6,534,800) | |
| Total capital | 21,544,500) | 21,959,700) | 13,809,600) | 13,361,100) | 14,220,600) | 15,320,600) | |
| Solvency Ratio | |||||||
| Debt to capital1 | 0.67 | 0.72 | 0.69 | 0.63 | 0.65 | 0.57 | |
| Benchmarks | |||||||
| Debt to Capital, Competitors2 | |||||||
| Coca-Cola Co. | — | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
1 2019 Calculation
Debt to capital = Total debt ÷ Total capital
= 14,490,000 ÷ 21,544,500 = 0.67
2 Click competitor name to see calculations.
An analysis of the solvency position between May 2014 and May 2019 reveals a general upward trend in leverage, characterized by a significant expansion of the balance sheet in 2018 followed by a moderate correction in 2019.
- Total Debt Trends
- Total debt exhibited relative stability between 2014 and 2017, fluctuating within a range of approximately 8.4 billion to 9.5 billion US dollars. However, a substantial increase occurred between May 2017 and May 2018, where debt rose from 9.48 billion to 15.82 billion US dollars, representing a significant increase in borrowed capital. By May 2019, total debt decreased slightly to 14.49 billion US dollars.
- Total Capital Movements
- Total capital showed a gradual decline from 15.32 billion US dollars in 2014 to 13.36 billion US dollars in 2016. Similar to the debt trend, total capital surged dramatically in 2018 to reach 21.96 billion US dollars, before settling at 21.54 billion US dollars in 2019. The simultaneous increase in debt and capital during 2018 suggests a major financing event or strategic acquisition.
- Debt to Capital Ratio Analysis
- The debt to capital ratio climbed steadily from 0.57 in 2014 to a peak of 0.72 in 2018, indicating an increasing reliance on debt to fund the capital structure. The ratio experienced a minor dip in 2016 to 0.63 before continuing its ascent. In May 2019, the ratio retracted to 0.67, signaling a slight reduction in the proportion of debt relative to total capital.
The overall trajectory indicates that the company significantly increased its financial leverage over the five-year period, though the most recent data suggests a shift toward stabilizing or reducing the debt burden relative to its total capital base.
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Debt to Assets
General Mills Inc., debt to assets calculation, comparison to benchmarks
| May 26, 2019 | May 27, 2018 | May 28, 2017 | May 29, 2016 | May 31, 2015 | May 25, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Current portion of long-term debt | 1,396,500) | 1,600,100) | 604,700) | 1,103,400) | 1,000,400) | 1,250,600) | |
| Notes payable | 1,468,700) | 1,549,800) | 1,234,100) | 269,800) | 615,800) | 1,111,700) | |
| Long-term debt, excluding current portion | 11,624,800) | 12,668,700) | 7,642,900) | 7,057,700) | 7,607,700) | 6,423,500) | |
| Total debt | 14,490,000) | 15,818,600) | 9,481,700) | 8,430,900) | 9,223,900) | 8,785,800) | |
| Total assets | 30,111,200) | 30,624,000) | 21,812,600) | 21,712,300) | 21,964,500) | 23,145,700) | |
| Solvency Ratio | |||||||
| Debt to assets1 | 0.48 | 0.52 | 0.43 | 0.39 | 0.42 | 0.38 | |
| Benchmarks | |||||||
| Debt to Assets, Competitors2 | |||||||
| Coca-Cola Co. | — | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
1 2019 Calculation
Debt to assets = Total debt ÷ Total assets
= 14,490,000 ÷ 30,111,200 = 0.48
2 Click competitor name to see calculations.
An analysis of the solvency position from 2014 to 2019 reveals a period of relative stability followed by a significant shift in capital structure. The debt to assets ratio fluctuated between a low of 0.38 in 2014 and a peak of 0.52 in 2018, indicating a general increase in financial leverage over the six-year duration.
- Debt to Assets Ratio Trends
- Between May 2014 and May 2017, the ratio remained within a tight corridor of 0.38 to 0.43. A marginal increase was noted in 2015, followed by a slight contraction in 2016, before returning to an upward trajectory in 2017. This suggests a consistent approach to balancing debt and asset growth during the first four years of the period.
- Capital Expansion and Leverage Spike
- A substantial increase in both total debt and total assets occurred between May 2017 and May 2018. Total debt rose from 9.48 billion USD to 15.82 billion USD, while total assets grew from 21.81 billion USD to 30.62 billion USD. This simultaneous surge resulted in the debt to assets ratio reaching its highest point of 0.52, signaling a strategic expansion or a significant acquisition financed through debt.
- Recent Solvency Adjustments
- By May 2019, a slight reduction in leverage is observed. Total debt decreased to 14.49 billion USD and total assets declined to 30.11 billion USD, bringing the debt to assets ratio down to 0.48. While this indicates a minor deleveraging phase, the ratio remains higher than the levels maintained prior to 2018.
Overall, the financial trajectory indicates a transition toward a more leveraged balance sheet. Although total assets increased significantly over the period, the proportional growth of debt has led to a higher reliance on borrowed capital to fund the asset base.
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Financial Leverage
General Mills Inc., financial leverage calculation, comparison to benchmarks
| May 26, 2019 | May 27, 2018 | May 28, 2017 | May 29, 2016 | May 31, 2015 | May 25, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Total assets | 30,111,200) | 30,624,000) | 21,812,600) | 21,712,300) | 21,964,500) | 23,145,700) | |
| Stockholders’ equity | 7,054,500) | 6,141,100) | 4,327,900) | 4,930,200) | 4,996,700) | 6,534,800) | |
| Solvency Ratio | |||||||
| Financial leverage1 | 4.27 | 4.99 | 5.04 | 4.40 | 4.40 | 3.54 | |
| Benchmarks | |||||||
| Financial Leverage, Competitors2 | |||||||
| Coca-Cola Co. | — | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
1 2019 Calculation
Financial leverage = Total assets ÷ Stockholders’ equity
= 30,111,200 ÷ 7,054,500 = 4.27
2 Click competitor name to see calculations.
The analysis of financial leverage between 2014 and 2019 reveals a period of increasing financial risk that peaked in 2017, followed by a phase of capitalization growth and deleveraging. The overall trajectory indicates a strategic shift in the company's capital structure and asset base.
- Total Assets Trend
- Total assets remained relatively stable between 2014 and 2017, fluctuating slightly around the 21.7 billion to 23.1 billion range. A significant expansion occurred in 2018, where assets increased to 30.6 billion, representing a substantial growth in the company's balance sheet size. This level was largely maintained into 2019 at 30.1 billion.
- Stockholders' Equity Evolution
- A consistent decline in stockholders' equity was observed from 2014 to 2017, falling from 6.5 billion to a low of 4.3 billion. This erosion of equity contributed significantly to the rise in financial leverage during this period. However, a sharp reversal occurred starting in 2018, with equity rising to 6.1 billion and further increasing to 7.1 billion by 2019, surpassing the initial 2014 levels.
- Financial Leverage Ratio Analysis
- The financial leverage ratio exhibited a steady upward trend from 3.54 in 2014 to a peak of 5.04 in 2017. This indicates that the company became increasingly reliant on debt relative to equity to finance its assets during this four-year window. Following the peak, the ratio began to decline, reaching 4.27 by 2019. The reduction in leverage during the final two years is attributed to the substantial growth in stockholders' equity, which outpaced the growth in total assets, thereby improving the company's solvency profile.
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Interest Coverage
General Mills Inc., interest coverage calculation, comparison to benchmarks
| May 26, 2019 | May 27, 2018 | May 28, 2017 | May 29, 2016 | May 31, 2015 | May 25, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net earnings attributable to General Mills | 1,752,700) | 2,131,000) | 1,657,500) | 1,697,400) | 1,221,300) | 1,824,400) | |
| Add: Net income attributable to noncontrolling interest | 33,500) | 32,000) | 43,600) | 39,400) | 38,100) | 36,900) | |
| Add: Income tax expense | 367,800) | 57,300) | 655,200) | 755,200) | 586,800) | 883,300) | |
| Add: Interest expense, net of capitalized interest | 527,400) | 385,400) | 302,100) | 311,900) | 328,600) | 318,500) | |
| Earnings before interest and tax (EBIT) | 2,681,400) | 2,605,700) | 2,658,400) | 2,803,900) | 2,174,800) | 3,063,100) | |
| Solvency Ratio | |||||||
| Interest coverage1 | 5.08 | 6.76 | 8.80 | 8.99 | 6.62 | 9.62 | |
| Benchmarks | |||||||
| Interest Coverage, Competitors2 | |||||||
| Coca-Cola Co. | — | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
1 2019 Calculation
Interest coverage = EBIT ÷ Interest expense
= 2,681,400 ÷ 527,400 = 5.08
2 Click competitor name to see calculations.
The interest coverage ratio exhibits a general downward trajectory over the six-year period ending May 26, 2019. While the ratio remains above 5.0, indicating a continued capacity to meet interest obligations, the margin of safety has contracted significantly from its 2014 peak. This deterioration in solvency is primarily driven by a substantial increase in net interest expenses during the latter years of the period, which outweighed the relative stability of operating earnings.
- Earnings Before Interest and Tax (EBIT) Trends
- EBIT demonstrated volatility throughout the period, starting at 3,063,100 thousand USD in 2014 before experiencing a sharp decline to 2,174,800 thousand USD in 2015. Following this dip, earnings recovered and stabilized, fluctuating between 2,605,700 thousand USD and 2,803,900 thousand USD from 2016 through 2019.
- Interest Expense Analysis
- Interest expenses remained relatively stable between 2014 and 2017, maintaining a narrow range between 302,100 thousand USD and 328,600 thousand USD. A significant shift occurred in 2018 and 2019, where expenses rose to 385,400 thousand USD and 527,400 thousand USD, respectively, marking a sharp increase in the cost of debt servicing.
- Interest Coverage Ratio Performance
- The interest coverage ratio reached its highest point of 9.62 in 2014. A notable contraction to 6.62 occurred in 2015, followed by a recovery to approximately 8.80–8.99 in 2016 and 2017. However, the ratio declined steadily thereafter, reaching a period low of 5.08 by May 2019. This final decline is directly attributable to the surge in interest expenses occurring while EBIT remained stagnant.
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Fixed Charge Coverage
General Mills Inc., fixed charge coverage calculation, comparison to benchmarks
| May 26, 2019 | May 27, 2018 | May 28, 2017 | May 29, 2016 | May 31, 2015 | May 25, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net earnings attributable to General Mills | 1,752,700) | 2,131,000) | 1,657,500) | 1,697,400) | 1,221,300) | 1,824,400) | |
| Add: Net income attributable to noncontrolling interest | 33,500) | 32,000) | 43,600) | 39,400) | 38,100) | 36,900) | |
| Add: Income tax expense | 367,800) | 57,300) | 655,200) | 755,200) | 586,800) | 883,300) | |
| Add: Interest expense, net of capitalized interest | 527,400) | 385,400) | 302,100) | 311,900) | 328,600) | 318,500) | |
| Earnings before interest and tax (EBIT) | 2,681,400) | 2,605,700) | 2,658,400) | 2,803,900) | 2,174,800) | 3,063,100) | |
| Add: Rent expense under all operating leases from continuing operations | 184,900) | 189,400) | 188,100) | 189,100) | 193,500) | 189,000) | |
| Earnings before fixed charges and tax | 2,866,300) | 2,795,100) | 2,846,500) | 2,993,000) | 2,368,300) | 3,252,100) | |
| Interest expense, net of capitalized interest | 527,400) | 385,400) | 302,100) | 311,900) | 328,600) | 318,500) | |
| Rent expense under all operating leases from continuing operations | 184,900) | 189,400) | 188,100) | 189,100) | 193,500) | 189,000) | |
| Fixed charges | 712,300) | 574,800) | 490,200) | 501,000) | 522,100) | 507,500) | |
| Solvency Ratio | |||||||
| Fixed charge coverage1 | 4.02 | 4.86 | 5.81 | 5.97 | 4.54 | 6.41 | |
| Benchmarks | |||||||
| Fixed Charge Coverage, Competitors2 | |||||||
| Coca-Cola Co. | — | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
1 2019 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 2,866,300 ÷ 712,300 = 4.02
2 Click competitor name to see calculations.
The solvency position regarding fixed charge obligations reflects a general deterioration over the six-year period ending May 26, 2019. While the capacity to meet fixed obligations remained intact, the margin of safety contracted significantly from the initial period of analysis.
- Earnings Before Fixed Charges and Tax
- Earnings exhibited notable volatility, starting at 3,252,100 thousand USD in 2014 before dropping to a period low of 2,368,300 thousand USD in 2015. Although a recovery occurred in 2016, earnings failed to return to 2014 levels, stabilizing in a range between 2,795,100 thousand USD and 2,993,000 thousand USD for the remainder of the period.
- Fixed Charges
- Fixed charges remained relatively stable between 2014 and 2017, fluctuating minimally around the 500,000 thousand USD mark. However, a marked upward trend emerged in the final two years, with charges rising to 574,800 thousand USD in 2018 and reaching a peak of 712,300 thousand USD in 2019.
- Fixed Charge Coverage Ratio
- The fixed charge coverage ratio trended downward from a high of 6.41 in 2014 to 4.02 in 2019. This decline was driven by the convergence of stagnant earnings and the sharp increase in fixed charges observed toward the end of the period, resulting in a reduced ability to cover fixed obligations relative to available earnings.
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