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)
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).
- Debt to Equity
- The debt to equity ratio showed a slight fluctuation over the observed years. It started at 0.83 in 2013, decreased to 0.73 in 2014, then rose to 0.89 in 2015. Data for subsequent years are not available, limiting the ability to discern longer-term trends for this ratio.
- Debt to Capital
- There was an overall increasing trend in the debt to capital ratio from 2013 to 2016, rising from 0.45 to a peak of 2.32. This was followed by a notable decline in the two subsequent years, with ratios of 1.77 in 2017 and 1.12 in 2018. The marked increase in 2016 suggests a significant change in the capital structure, which was somewhat reversed in the following years.
- Debt to Assets
- The debt to assets ratio remained relatively stable over the six-year period, fluctuating within a narrow range between 0.17 and 0.24. This indicates that the proportion of debt financing relative to total assets was maintained without major changes, suggesting consistent asset financing strategies.
- Financial Leverage
- Financial leverage ratios were consistent from 2013 through 2015, hovering around 3.85 to 3.88. Data for later years is missing, which prevents analysis of any changes beyond 2015. The stable leverage levels in the available period indicate a steady use of debt relative to equity in capital structure.
- Interest Coverage
- The interest coverage ratio experienced a downward trend from 2013 to 2018, starting at a high of 16.28 and decreasing steadily to 10.66 by 2018. This decline suggests decreasing ability to cover interest expenses from operating earnings, potentially indicating increased financial risk or reduced profitability over time.
- Fixed Charge Coverage
- Fixed charge coverage exhibited variability, initially rising from 5.57 in 2013 to 5.88 in 2014 before dropping to 4.57 in 2015. A significant increase occurred in 2016 reaching 8.95, followed by declines to 7.44 in 2017 and 6.88 in 2018. Despite fluctuations, the later years show a more robust coverage ratio than the early period, suggesting improved capability to meet fixed financial obligations after 2015.
Debt Ratios
Coverage Ratios
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. | — | — | — | — | — | — | |
| 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.
The financial data indicates notable changes in debt, equity, and leverage ratios over the six-year period. Key observations reveal shifts in capital structure and possible financial strategies.
- Total Debt
- The total debt shows a decreasing trend overall, with a peak value of 24,665 million US dollars in 2015 followed by a sharp decline through to 2018. Debt decreased significantly from 2015 to 2016, dropping by almost 72%, from 24,665 million to 6,836 million. Subsequently, total debt remained relatively stable at lower levels around 6,000 to 7,800 million US dollars between 2016 and 2018.
- Total Stockholders' Equity (Deficit)
- Stockholders' equity remained positive and relatively stable from 2013 to 2015, fluctuating between approximately 26,700 and 27,700 million US dollars. Starting 2016, a dramatic reversal occurs, and the equity turns negative reaching a deficit of 3,889 million US dollars in 2016. Though the deficit decreases over time, it remains negative in 2017 and 2018, indicating a substantial erosion of shareholders’ equity and suggesting financial challenges or restructuring efforts during these years.
- Debt to Equity Ratio
- The debt to equity ratio was relatively moderate from 2013 through 2015, fluctuating between 0.73 and 0.89. No data is available for this ratio post-2015, likely due to the equity turning negative, which makes this ratio undefined or irrelevant. The absence of this ratio aligns with the negative equity figures observed, highlighting a less conventional capital structure and potential financial distress or significant changes in financing approach.
Overall, the data reveals a company that reduced its debt substantially after 2015 while experiencing a significant decline in equity that led to a negative equity position. The combination of declining debt and negative equity suggests a strategic shift possibly aimed at deleveraging but accompanied by equity erosion, which may affect the company’s financial stability and investor perception.
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. | — | — | — | — | — | — | |
| 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.
- Total debt
- The total debt experienced a decline from 22,587 million USD in 2013 to 19,525 million USD in 2014, followed by an increase to 24,665 million USD in 2015. Subsequently, a significant reduction occurred in 2016 to 6,836 million USD, with minor fluctuations in the following years, reaching 5,987 million USD in 2018. This pattern indicates an initial period of debt increase, succeeded by a substantial deleveraging phase starting in 2016.
- Total capital
- Total capital demonstrated a downward trend from 49,856 million USD in 2013 to 46,256 million USD in 2014, then an increase to 52,433 million USD in 2015. However, a sharp decline was observed in 2016, falling to 2,947 million USD, followed by a gradual recovery to 4,411 million USD in 2017 and 5,348 million USD in 2018. This sharp drop and partial recovery suggest major changes in capital structure or accounting adjustments during this period.
- Debt to capital ratio
- The debt to capital ratio decreased slightly from 0.45 in 2013 to 0.42 in 2014, before rising to 0.47 in 2015. In 2016, this ratio increased dramatically to 2.32, then declined to 1.77 in 2017 and further to 1.12 in 2018. The spike in 2016 indicates a temporary increase in leverage or a significant shift in capital composition, while the subsequent decline suggests efforts to reduce leverage and restore balance between debt and capital.
- Overall analysis
- The financial data reveals a notable shift around 2016, characterized by a sharp reduction in both total debt and total capital, accompanied by a pronounced increase in the debt to capital ratio. This suggests a restructuring or reclassification event impacting the balance sheet metrics. Post-2016, the company appears to be gradually stabilizing its capital structure by decreasing leverage, as evidenced by the declining debt to capital ratio, and modestly increasing total capital. These trends highlight a period of adjustment followed by efforts to improve financial stability.
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. | — | — | — | — | — | — | |
| 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.
- Total Debt
- The total debt exhibited a significant fluctuation over the analyzed period. Starting at 22,587 million USD in 2013, it decreased to 19,525 million USD in 2014, then rose sharply to 24,665 million USD in 2015. Following this peak, there was a pronounced decline in 2016 to 6,836 million USD, with minor increases to 7,819 million USD in 2017, and a subsequent decrease to 5,987 million USD in 2018. This pattern indicates a substantial deleveraging effort post-2015.
- Total Assets
- Total assets showed a relatively steady trend between 2013 and 2015, moving slightly from 105,676 million USD to 106,882 million USD. However, a sharp reduction occurred in 2016, plunging to 29,010 million USD. After this, assets moderately increased to 32,913 million USD in 2017 and further to 34,622 million USD in 2018. The abrupt asset decline entering 2016 suggests a significant restructuring or divestiture event.
- Debt to Assets Ratio
- The debt to assets ratio remained relatively stable around 0.20 to 0.24 from 2013 through 2017, fluctuating slightly with a low of 0.19 in 2014 and peaking at 0.24 in 2016 and 2017. In 2018, this ratio significantly declined to 0.17. This decrease complements the observed reduction in total debt and the gradual recovery of total assets, indicating an improved balance sheet with a lower leverage position by the end of the period.
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. | — | — | — | — | — | — | |
| 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.
- Total assets
- The total assets initially showed slight fluctuations, decreasing from 105,676 million USD in 2013 to 103,206 million USD in 2014, followed by an increase to 106,882 million USD in 2015. From 2015 onwards, there was a significant reduction in total assets, reaching 29,010 million USD in 2016. After this sharp decline, total assets gradually increased again in the subsequent years, reaching 32,913 million USD in 2017 and 34,622 million USD in 2018.
- Total HP stockholders’ equity (deficit)
- Stockholders’ equity exhibited a downward trend over the period. It started at 27,269 million USD in 2013, then decreased gradually to 26,731 million USD in 2014 and increased slightly to 27,768 million USD in 2015. A notable shift occurred in 2016, when equity turned into a deficit of -3,889 million USD. The deficit persisted though showing slight improvement by 2017 (-3,408 million USD) and 2018 (-639 million USD), indicating some recovery but not a return to positive equity within the reported timeframe.
- Financial leverage
- Financial leverage ratios were consistently around 3.85 to 3.88 between 2013 and 2015, suggesting stable leverage. There is no reported data for financial leverage from 2016 onwards, which limits any further analysis on leverage trends during the years when significant changes in assets and equity occurred.
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. | — | — | — | — | — | — | |
| 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.
- Earnings before interest and tax (EBIT)
- The EBIT shows a clear downward trend over the six-year period. Starting from 6,936 million US dollars in 2013, there is a consistent decline each year, reaching 3,325 million US dollars in 2018. The decline is particularly steep between 2014 and 2016, after which the decrease continues but at a slower pace.
- Interest expense on borrowings
- Interest expense generally decreases from 426 million US dollars in 2013 to 273 million in 2016. However, after 2016, there is a slight increase in interest expense, reaching 312 million US dollars by 2018. This suggests some increase in borrowing costs or debt levels in the latter part of the period.
- Interest coverage ratio
- The interest coverage ratio also exhibits a declining trend, starting at a strong 16.28 in 2013 and falling to 10.66 by 2018. The ratio remains above 10 throughout the period, which indicates that EBIT still covers interest expenses by a considerable margin, but the decline highlights deteriorating earnings relative to interest obligations over time.
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. | — | — | — | — | — | — | |
| 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.
- Earnings before fixed charges and tax
- The earnings before fixed charges and tax display a decreasing trend over the six-year period. Starting at 7,936 million US dollars in 2013, the figure slightly decreased to 7,901 million in 2014 but then experienced a more pronounced decline in the following years, dropping to 6,059 million in 2015, 4,234 million in 2016, and further down to 3,525 million by 2018. This represents a substantial reduction in earnings over the timeframe analyzed.
- Fixed charges
- Fixed charges remain relatively stable throughout the period, with minor fluctuations. The charges decreased from 1,426 million US dollars in 2013 to 1,344 million in 2014 and 1,327 million in 2015. Thereafter, a significant decrease occurred in 2016 to 473 million, followed by slight increases to 509 million and 512 million in 2017 and 2018, respectively. Overall, fixed charges show a general downward shift with some recovery in the last two years.
- Fixed charge coverage ratio
- The fixed charge coverage ratio exhibits variability with an overall maintenance of a solid coverage level. It started at 5.57 in 2013, increased slightly to 5.88 in 2014, then dropped to 4.57 in 2015. Despite the declining earnings, the ratio surged to 8.95 in 2016, followed by decreases to 7.44 in 2017 and 6.88 in 2018. The sharp increase in 2016 suggests improved ability to cover fixed charges, potentially due to the significant drop in fixed charges that year, despite reduced earnings.