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
HP Inc., solvency ratios
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
The solvency profile exhibits a period of relative stability followed by a significant shift in capital structure and a gradual decline in coverage capacity between 2013 and 2018.
- Capital Structure and Leverage
- Debt to capital ratios remained stable below 0.50 until 2016, when a substantial increase to 2.32 occurred. This peak was followed by a steady downward trend, reaching 1.12 by 2018. Debt to assets remained comparatively consistent, fluctuating between 0.19 and 0.24 for most of the period before declining to 0.17 in 2018. Early measurements of debt to equity and financial leverage showed minimal variance between 2013 and 2015.
- Coverage Capacity
- Interest coverage ratios reached a peak of 20.06 in 2014 but entered a continuous downward trajectory thereafter, ending at 10.66 in 2018, which suggests a reduction in the margin available to meet interest obligations. Fixed charge coverage displayed higher volatility, with a dip in 2015 followed by a sharp increase to 8.95 in 2016, and a subsequent gradual decline to 6.88 by the end of the period.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Debt to Equity
HP Inc., debt to equity calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Notes payable and short-term borrowings | 1,463) | 1,072) | 78) | 2,885) | 3,486) | 5,979) | |
| Long-term debt, excluding current portion | 4,524) | 6,747) | 6,758) | 21,780) | 16,039) | 16,608) | |
| Total debt | 5,987) | 7,819) | 6,836) | 24,665) | 19,525) | 22,587) | |
| Total HP stockholders’ equity (deficit) | (639) | (3,408) | (3,889) | 27,768) | 26,731) | 27,269) | |
| Solvency Ratio | |||||||
| Debt to equity1 | — | — | — | 0.89 | 0.73 | 0.83 | |
| Benchmarks | |||||||
| Debt to Equity, Competitors2 | |||||||
| Apple Inc. | — | — | — | — | — | — | |
| Arista Networks Inc. | — | — | — | — | — | — | |
| Cisco Systems Inc. | — | — | — | — | — | — | |
| Dell Technologies Inc. | — | — | — | — | — | — | |
| Lumentum Holdings Inc. | — | — | — | — | — | — | |
| Super Micro Computer Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Debt to equity = Total debt ÷ Total HP stockholders’ equity (deficit)
= 5,987 ÷ -639 = —
2 Click competitor name to see calculations.
An analysis of the solvency position reveals a significant structural transition in the capital composition between 2015 and 2016. During the period from 2013 to 2015, the company maintained a conventional capital structure characterized by positive stockholders' equity and fluctuating debt levels. However, a drastic shift occurred in 2016, marked by a sharp reduction in total liabilities and the emergence of a substantial equity deficit.
- Total Debt Trends
- A general downward trajectory in total debt is observed over the six-year period. After peaking at 24,665 million USD in 2015, total debt experienced a precipitous decline to 6,836 million USD in 2016. This reduction continued overall, with debt levels reaching a period low of 5,987 million USD by October 31, 2018.
- Stockholders' Equity and Deficit Analysis
- The equity position underwent a severe reversal in 2016, moving from a positive balance of 27,768 million USD in 2015 to a deficit of 3,889 million USD. Following this collapse, a consistent recovery trend is evident; the deficit narrowed to 3,408 million USD in 2017 and further improved to 639 million USD by 2018, indicating a gradual restoration of the net asset position.
- Debt to Equity Ratio Interpretation
- Between 2013 and 2015, the debt to equity ratio remained relatively stable, fluctuating between a low of 0.73 and a high of 0.89. The absence of ratio data from 2016 through 2018 coincides with the transition to negative stockholders' equity, a condition that typically renders the standard debt-to-equity metric mathematically inapplicable or non-representative for solvency analysis.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Debt to Capital
HP Inc., debt to capital calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Notes payable and short-term borrowings | 1,463) | 1,072) | 78) | 2,885) | 3,486) | 5,979) | |
| Long-term debt, excluding current portion | 4,524) | 6,747) | 6,758) | 21,780) | 16,039) | 16,608) | |
| Total debt | 5,987) | 7,819) | 6,836) | 24,665) | 19,525) | 22,587) | |
| Total HP stockholders’ equity (deficit) | (639) | (3,408) | (3,889) | 27,768) | 26,731) | 27,269) | |
| Total capital | 5,348) | 4,411) | 2,947) | 52,433) | 46,256) | 49,856) | |
| Solvency Ratio | |||||||
| Debt to capital1 | 1.12 | 1.77 | 2.32 | 0.47 | 0.42 | 0.45 | |
| Benchmarks | |||||||
| Debt to Capital, Competitors2 | |||||||
| Apple Inc. | — | — | — | — | — | — | |
| Arista Networks Inc. | — | — | — | — | — | — | |
| Cisco Systems Inc. | — | — | — | — | — | — | |
| Dell Technologies Inc. | — | — | — | — | — | — | |
| Lumentum Holdings Inc. | — | — | — | — | — | — | |
| Super Micro Computer Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Debt to capital = Total debt ÷ Total capital
= 5,987 ÷ 5,348 = 1.12
2 Click competitor name to see calculations.
An analysis of solvency metrics from 2013 to 2018 reveals two distinct financial phases. The first period, spanning 2013 to 2015, is characterized by stability in the capital structure, while the period from 2016 to 2018 exhibits a significant structural reconfiguration of the balance sheet.
- Capital Structure Stability (2013-2015)
- Between 2013 and 2015, the debt to capital ratio remained relatively constant, fluctuating within a narrow range between 0.42 and 0.47. During this timeframe, total debt reached a peak of 24,665 million US dollars in 2015, which was supported by a robust total capital base of 52,433 million US dollars.
- Structural Divergence (2016)
- A sharp transition occurred in 2016, marked by a precipitous decline in total capital to 2,947 million US dollars. Although total debt also decreased significantly to 6,836 million US dollars, the disproportionate contraction of the capital base caused the debt to capital ratio to spike to 2.32. This indicates a period where debt obligations significantly exceeded total capital.
- Solvency Recovery Trend (2017-2018)
- Following the volatility of 2016, a consistent downward trend in the debt to capital ratio is observed. The ratio declined from 2.32 in 2016 to 1.77 in 2017, and further to 1.12 by October 31, 2018. This improvement was facilitated by a gradual increase in total capital, rising to 5,348 million US dollars by 2018, combined with a continued reduction of total debt to a period low of 5,987 million US dollars.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Debt to Assets
HP Inc., debt to assets calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Notes payable and short-term borrowings | 1,463) | 1,072) | 78) | 2,885) | 3,486) | 5,979) | |
| Long-term debt, excluding current portion | 4,524) | 6,747) | 6,758) | 21,780) | 16,039) | 16,608) | |
| Total debt | 5,987) | 7,819) | 6,836) | 24,665) | 19,525) | 22,587) | |
| Total assets | 34,622) | 32,913) | 29,010) | 106,882) | 103,206) | 105,676) | |
| Solvency Ratio | |||||||
| Debt to assets1 | 0.17 | 0.24 | 0.24 | 0.23 | 0.19 | 0.21 | |
| Benchmarks | |||||||
| Debt to Assets, Competitors2 | |||||||
| Apple Inc. | — | — | — | — | — | — | |
| Arista Networks Inc. | — | — | — | — | — | — | |
| Cisco Systems Inc. | — | — | — | — | — | — | |
| Dell Technologies Inc. | — | — | — | — | — | — | |
| Lumentum Holdings Inc. | — | — | — | — | — | — | |
| Super Micro Computer Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Debt to assets = Total debt ÷ Total assets
= 5,987 ÷ 34,622 = 0.17
2 Click competitor name to see calculations.
Analysis of solvency metrics from 2013 to 2018 reveals a period of significant balance sheet restructuring followed by a marked improvement in the company's leverage position.
- Debt to Assets Ratio Trend
- The debt to assets ratio remained relatively stable but elevated between 2013 and 2017, fluctuating within a narrow band between 0.19 and 0.24. A significant shift occurred in 2018, when the ratio dropped to 0.17, representing the lowest level of debt relative to assets over the analyzed period.
- Balance Sheet Scale and Restructuring
- A substantial contraction in the scale of the balance sheet is observed between October 31, 2015, and October 31, 2016. Total assets decreased from 106,882 million US$ to 29,010 million US$, while total debt fell from 24,665 million US$ to 6,836 million US$. During this transition, the debt to assets ratio increased slightly from 0.23 to 0.24, indicating that the reduction in total assets was more pronounced than the reduction in total debt.
- Recent Solvency Improvement
- From 2017 to 2018, a strengthening of the solvency position is evident. Total assets grew from 32,913 million US$ to 34,622 million US$, while total debt decreased from 7,819 million US$ to 5,987 million US$. This divergence led to a reduction in the debt to assets ratio to 0.17, signaling a decrease in financial leverage and an enhanced capacity to cover liabilities with existing assets.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Financial Leverage
HP Inc., financial leverage calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Total assets | 34,622) | 32,913) | 29,010) | 106,882) | 103,206) | 105,676) | |
| Total HP stockholders’ equity (deficit) | (639) | (3,408) | (3,889) | 27,768) | 26,731) | 27,269) | |
| Solvency Ratio | |||||||
| Financial leverage1 | — | — | — | 3.85 | 3.86 | 3.88 | |
| Benchmarks | |||||||
| Financial Leverage, Competitors2 | |||||||
| Apple Inc. | — | — | — | — | — | — | |
| Arista Networks Inc. | — | — | — | — | — | — | |
| Cisco Systems Inc. | — | — | — | — | — | — | |
| Dell Technologies Inc. | — | — | — | — | — | — | |
| Lumentum Holdings Inc. | — | — | — | — | — | — | |
| Super Micro Computer Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Financial leverage = Total assets ÷ Total HP stockholders’ equity (deficit)
= 34,622 ÷ -639 = —
2 Click competitor name to see calculations.
The financial position shows a stark divergence between two distinct periods, separated by a significant structural shift in 2016. From 2013 to 2015, the balance sheet remained relatively stable, followed by a sharp contraction in total assets and a transition to a stockholders' equity deficit from 2016 through 2018.
- Asset Base Trends
- Total assets were maintained at levels exceeding 100 billion USD between 2013 and 2015. A substantial decrease occurred in 2016, where assets fell to 29.01 billion USD. Following this contraction, a gradual upward trend was observed, with assets increasing to 34.62 billion USD by October 31, 2018.
- Equity and Solvency Position
- Stockholders' equity remained positive and stable between 2013 and 2015, peaking at 27.77 billion USD in 2015. In 2016, the equity position shifted to a deficit of 3.89 billion USD. This deficit was progressively reduced over the subsequent two years, narrowing to 639 million USD by 2018, indicating a trajectory toward the restoration of a positive equity balance.
- Financial Leverage Ratio
- Between 2013 and 2015, the financial leverage ratio remained consistent, experiencing a marginal decline from 3.88 to 3.85. This indicates a stable proportional relationship between assets and equity during the first three years of the period. While ratio values are not provided for 2016 through 2018, the presence of a stockholders' equity deficit during those years suggests a fundamental change in the company's solvency structure.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Interest Coverage
HP Inc., interest coverage calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net earnings | 5,327) | 2,526) | 2,496) | 4,554) | 5,013) | 5,113) | |
| Less: Net loss from discontinued operations | —) | —) | (170) | —) | —) | —) | |
| Add: Income tax expense | (2,314) | 750) | 1,095) | 178) | 1,544) | 1,397) | |
| Add: Interest expense on borrowings | 312) | 309) | 273) | 327) | 344) | 426) | |
| Earnings before interest and tax (EBIT) | 3,325) | 3,585) | 4,034) | 5,059) | 6,901) | 6,936) | |
| Solvency Ratio | |||||||
| Interest coverage1 | 10.66 | 11.60 | 14.78 | 15.47 | 20.06 | 16.28 | |
| Benchmarks | |||||||
| Interest Coverage, Competitors2 | |||||||
| Apple Inc. | — | — | — | — | — | — | |
| Arista Networks Inc. | — | — | — | — | — | — | |
| Cisco Systems Inc. | — | — | — | — | — | — | |
| Dell Technologies Inc. | — | — | — | — | — | — | |
| Lumentum Holdings Inc. | — | — | — | — | — | — | |
| Super Micro Computer Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Interest coverage = EBIT ÷ Interest expense
= 3,325 ÷ 312 = 10.66
2 Click competitor name to see calculations.
The financial data indicates a general deterioration in the company's ability to cover interest expenses from operating profits between October 2013 and October 2018. Although the interest coverage ratio remains significantly above the threshold of 1.0, the trend reflects a steady narrowing of the solvency margin.
- Earnings Before Interest and Tax (EBIT)
- A consistent and substantial downward trend is observed in EBIT, which declined from US$ 6,936 million in 2013 to US$ 3,325 million by 2018. This represents a reduction of approximately 52% in operating earnings over the five-year period, serving as the primary driver for the declining solvency ratios.
- Interest Expense on Borrowings
- Interest expenses exhibited more stability than operating earnings, though they experienced fluctuations. Costs decreased from US$ 426 million in 2013 to a low of US$ 273 million in 2016, before rising slightly to US$ 312 million by 2018.
- Interest Coverage Ratio
- The interest coverage ratio reached a peak of 20.06 in 2014, resulting from a combination of stable EBIT and reduced interest costs. However, a continuous decline followed, ending at 10.66 in 2018. This contraction demonstrates that while the company retains a strong capacity to service its debt, the buffer provided by operating profits has diminished significantly due to the erosion of EBIT.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Fixed Charge Coverage
HP Inc., fixed charge coverage calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net earnings | 5,327) | 2,526) | 2,496) | 4,554) | 5,013) | 5,113) | |
| Less: Net loss from discontinued operations | —) | —) | (170) | —) | —) | —) | |
| Add: Income tax expense | (2,314) | 750) | 1,095) | 178) | 1,544) | 1,397) | |
| Add: Interest expense on borrowings | 312) | 309) | 273) | 327) | 344) | 426) | |
| Earnings before interest and tax (EBIT) | 3,325) | 3,585) | 4,034) | 5,059) | 6,901) | 6,936) | |
| Add: Rent expense | 200) | 200) | 200) | 1,000) | 1,000) | 1,000) | |
| Earnings before fixed charges and tax | 3,525) | 3,785) | 4,234) | 6,059) | 7,901) | 7,936) | |
| Interest expense on borrowings | 312) | 309) | 273) | 327) | 344) | 426) | |
| Rent expense | 200) | 200) | 200) | 1,000) | 1,000) | 1,000) | |
| Fixed charges | 512) | 509) | 473) | 1,327) | 1,344) | 1,426) | |
| Solvency Ratio | |||||||
| Fixed charge coverage1 | 6.88 | 7.44 | 8.95 | 4.57 | 5.88 | 5.57 | |
| Benchmarks | |||||||
| Fixed Charge Coverage, Competitors2 | |||||||
| Apple Inc. | — | — | — | — | — | — | |
| Arista Networks Inc. | — | — | — | — | — | — | |
| Cisco Systems Inc. | — | — | — | — | — | — | |
| Dell Technologies Inc. | — | — | — | — | — | — | |
| Lumentum Holdings Inc. | — | — | — | — | — | — | |
| Super Micro Computer Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 3,525 ÷ 512 = 6.88
2 Click competitor name to see calculations.
The solvency profile between 2013 and 2018 is characterized by a significant contraction in operating earnings offset by a substantial reduction in fixed obligations. This dynamic resulted in a volatile but generally strengthened coverage position over the analyzed period.
- Earnings before fixed charges and tax
- A persistent downward trend is observed in earnings, which declined from US$ 7,936 million in 2013 to US$ 3,525 million in 2018. The most aggressive contraction occurred between 2014 and 2016, where earnings fell from US$ 7,901 million to US$ 4,234 million, representing a decrease of approximately 46% in two years.
- Fixed charges
- Fixed obligations remained relatively stable between 2013 and 2015, averaging approximately US$ 1,366 million annually. A sharp structural shift occurred in 2016, when fixed charges dropped to US$ 473 million. These charges remained stabilized at this lower level through 2018, ending the period at US$ 512 million.
- Fixed charge coverage ratio
- The coverage ratio fluctuated significantly, reaching a period low of 4.57 in 2015 before spiking to a peak of 8.95 in 2016. This peak was not the result of earnings growth, but rather the drastic reduction in fixed charges. Between 2016 and 2018, the ratio entered a gradual decline, ending at 6.88, as the continued erosion of earnings began to outweigh the benefits of the reduced fixed cost base.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?