Analysis of Solvency Ratios
Quarterly Data
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
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Solvency Ratios (Summary)
Illinois Tool Works Inc., solvency ratios (quarterly data)
Based on: 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
- Debt to Equity
- The debt-to-equity ratio exhibited a generally increasing trend from March 2018 to March 2020, rising from 1.82 to a peak of 3.37. This indicates an increasing reliance on debt financing relative to equity during this period. Following the peak, there was a noticeable decline through 2021, reaching 2.12 by December 2021, suggesting a reduction in leverage and a shift toward a more balanced capital structure.
- Debt to Capital
- This ratio showed a gradual increase from 0.64 in March 2018 to 0.77 by the end of June 2020, pointing to a higher proportion of debt in the company’s total capital. Subsequently, it decreased moderately to stabilize around 0.68 by the end of 2021, reflecting a cautious approach in maintaining or reducing reliance on debt within the capital structure.
- Debt to Assets
- The debt-to-assets ratio displayed a consistent upward trend beginning at 0.47 in March 2018, reaching a high of around 0.54 in the first half of 2020. This implies an increasing share of assets financed by debt. From mid-2020 onward, the ratio gradually receded to approximately 0.48 by the end of 2021, indicating the company began to reduce its asset leverage post the peak.
- Financial Leverage
- Financial leverage steadily increased from 3.89 in early 2018 to a maximum of 6.20 in March 2020. This suggests the company was using more debt to finance assets relative to equity over this time frame. Following this peak, financial leverage declined sharply through 2021, settling at 4.44 by December 2021, which points to a strategic deleveraging and strengthening of equity support for assets.
- Interest Coverage
- Interest coverage remained relatively strong and stable throughout the period, starting at 13.86 in March 2018, rising moderately with some fluctuations to peak at 17.47 in December 2021. Despite the increased financial leverage and debt levels around 2020, the company maintained adequate earnings relative to interest expenses, suggesting effective management of interest obligations and consistent operating performance.
Debt Ratios
Coverage Ratios
Debt to Equity
Illinois Tool Works Inc., debt to equity calculation (quarterly data)
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||
| Short-term debt | |||||||||||||||||||||
| Long-term debt | |||||||||||||||||||||
| Total debt | |||||||||||||||||||||
| Stockholders’ equity attributable to ITW | |||||||||||||||||||||
| Solvency Ratio | |||||||||||||||||||||
| Debt to equity1 | |||||||||||||||||||||
| 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: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
1 Q4 2021 Calculation
Debt to equity = Total debt ÷ Stockholders’ equity attributable to ITW
= ÷ =
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals several notable trends regarding the company's capital structure over the examined periods.
- Total Debt
- Total debt remained relatively stable from early 2018 through the end of 2019, fluctuating slightly between approximately $7.4 billion and $7.8 billion. Beginning in early 2020, there is a gradual upward trend, with total debt increasing steadily to reach a peak of about $8.1 billion by the end of 2020. In 2021, total debt appears to stabilize somewhat, declining marginally but remaining near the $7.6 to $7.9 billion range.
- Stockholders’ Equity
- Stockholders’ equity attributable to the company showed a clear declining trend throughout 2018 and 2019, dropping from around $4.2 billion at the start of 2018 to just above $3 billion by the end of 2019. A significant decline occurred in the first quarter of 2020, where equity decreased further to approximately $2.3 billion. However, from mid-2020 onward, equity began to recover steadily, reaching roughly $3.6 billion by the end of 2021.
- Debt to Equity Ratio
- The debt to equity ratio indicates considerable variation over the period. The ratio increased consistently from 1.82 in early 2018 to a high of 2.58 by the end of 2019. This upward trend accelerated sharply through 2020, peaking at 3.37 in the first quarter, reflecting the combined effect of rising debt and dropping equity. Subsequently, the ratio declined gradually throughout 2020 and 2021, ending at approximately 2.12, indicating an improvement in the balance between debt and equity, primarily driven by equity recovery and stabilization of debt levels.
Overall, the data suggest the company experienced financial stress or leveraged its balance sheet more heavily during 2019 and early 2020, as evidenced by the rising debt-to-equity ratio and declining equity value. However, beginning mid-2020 through 2021, there was a notable recovery in equity and a reduction in leverage, reflecting a strengthening of the capital structure. The stabilization of total debt alongside equity growth contributed positively to improving the company’s financial position.
Debt to Capital
Illinois Tool Works Inc., debt to capital calculation (quarterly data)
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||
| Short-term debt | |||||||||||||||||||||
| Long-term debt | |||||||||||||||||||||
| Total debt | |||||||||||||||||||||
| Stockholders’ equity attributable to ITW | |||||||||||||||||||||
| Total capital | |||||||||||||||||||||
| Solvency Ratio | |||||||||||||||||||||
| Debt to capital1 | |||||||||||||||||||||
| 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: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
1 Q4 2021 Calculation
Debt to capital = Total debt ÷ Total capital
= ÷ =
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals several notable trends in the capital structure metrics over the observed periods.
- Total Debt
- Total debt displayed a relatively stable pattern from March 2018 through December 2019, fluctuating slightly between approximately $7.4 billion and $7.8 billion. From March 2020 onward, debt levels exhibited a gradual upward trend, reaching a peak around $8.1 billion by the end of 2020. Subsequently, a mild decline is observed through 2021, with total debt settling near $7.7 billion by December 2021.
- Total Capital
- Total capital experienced a downward trend during the initial part of the timeline, declining from approximately $11.7 billion in early 2018 to near $10.0 billion by March 2020. Following this, a reversal occurred whereby total capital increased steadily over the rest of the periods, surpassing its prior levels and reaching around $11.3 billion by the end of 2021.
- Debt to Capital Ratio
- The debt to capital ratio showed a clear upward trajectory from 0.64 in March 2018 to a peak of 0.77 in mid-2020, indicating an increasing reliance on debt financing relative to total capital during this period. After mid-2020, the ratio subtly declined and stabilized around 0.68 through the end of 2021, suggesting a moderate reduction in leverage and a shift towards a more balanced capital structure.
Overall, the data reflects an initial phase characterized by steady debt levels combined with declining total capital, resulting in increased leverage. This phase was followed by a period of growing total capital and a modest reduction in debt-to-capital ratio, indicating efforts to strengthen the capital base and manage financial leverage more conservatively in recent quarters.
Debt to Assets
Illinois Tool Works Inc., debt to assets calculation (quarterly data)
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||
| Short-term debt | |||||||||||||||||||||
| Long-term debt | |||||||||||||||||||||
| Total debt | |||||||||||||||||||||
| Total assets | |||||||||||||||||||||
| Solvency Ratio | |||||||||||||||||||||
| Debt to assets1 | |||||||||||||||||||||
| 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: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
1 Q4 2021 Calculation
Debt to assets = Total debt ÷ Total assets
= ÷ =
2 Click competitor name to see calculations.
- Total Debt
- The total debt exhibited a generally stable pattern over the analyzed period with slight fluctuations. Starting at approximately 7.55 billion US dollars in March 2018, the figure experienced incremental rises and falls but remained within a relatively narrow range between roughly 7.4 billion and 8.1 billion. Notable peaks were observed in the fourth quarters of 2020 and 2019, reaching over 8 billion and close to 7.8 billion respectively. By the final reported quarter of December 2021, total debt had slightly decreased from previous highs but remained above the 7.5 billion mark.
- Total Assets
- Total assets showed a downward trend from March 2018 through to the first quarter of 2020, decreasing from approximately 16.16 billion to around 14.15 billion US dollars. This decline was followed by a recovery phase extending through to the end of 2021, with total assets rising back to approximately 16.08 billion. The fluctuations suggest an initial asset contraction over the first two years, possibly due to divestitures, depreciation, or operational factors, followed by growth or acquisition activity leading to the rebound.
- Debt to Assets Ratio
- The debt to assets ratio trended upward from 0.47 in March 2018 to a peak of 0.54 through mid-2020, indicating a relative increase in leverage. This reflects a period during which the company’s debt levels remained steady or increased slightly while total assets declined, thereby intensifying leverage. Subsequently, the ratio gradually decreased in the latter part of 2020 into 2021, ultimately returning near to 0.48. This decrease aligns with the observed asset base recovery and suggests a strategic reduction in leverage relative to asset size.
- Overall Analysis
- The period analyzed demonstrates a company managing stable debt levels amidst fluctuating asset bases. The rise and fall in total assets heavily influenced leverage ratios, with increased leverage during asset contraction and de-leveraging as assets recovered. This pattern may reflect responses to economic conditions or internal strategic decisions targeting balance sheet optimization. The relatively stable debt figures indicate a cautious approach toward incurring new liabilities despite asset fluctuations.
Financial Leverage
Illinois Tool Works Inc., financial leverage calculation (quarterly data)
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||
| Total assets | |||||||||||||||||||||
| Stockholders’ equity attributable to ITW | |||||||||||||||||||||
| Solvency Ratio | |||||||||||||||||||||
| Financial leverage1 | |||||||||||||||||||||
| 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: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
1 Q4 2021 Calculation
Financial leverage = Total assets ÷ Stockholders’ equity attributable to ITW
= ÷ =
2 Click competitor name to see calculations.
Over the observed periods, total assets exhibited some fluctuations but generally remained within a range close to 15,000 to 16,000 million US dollars. After an initial gradual decline from March 2018 through December 2018, total assets showed a mild recovery through 2019 before decreasing again in early 2020. Subsequently, there was a steady increase through 2021, culminating in the highest value at the year-end 2021 in the dataset.
Stockholders' equity attributable to the company demonstrated a downward trend from early 2018 through March 2020, with values decreasing from over 4,100 million US dollars to approximately 2,283 million US dollars. Post-March 2020, equity began to recover steadily, showing consistent growth throughout the subsequent quarters. By December 2021, equity rebounded to around 3,625 million US dollars, still below the initial levels observed in 2018 but indicating a positive trajectory.
The financial leverage ratio (defined as total assets divided by stockholders' equity) increased markedly from 3.89 at the start of 2018 to a peak of 6.20 in March 2020, reflecting a substantial increase in leverage during this period. This peak suggests increased reliance on debt or other liabilities relative to equity. Following this peak, the leverage ratio decreased steadily, reaching approximately 4.44 by the end of 2021, aligning with the recovery observed in equity levels and relative stabilization of total assets.
- Summary of Trends:
- - Total assets show modest volatility with an initial decline, mid-term stability, and long-term recovery.
- - Stockholders’ equity declined significantly through early 2020 before recovering progressively thereafter.
- - Financial leverage increased sharply until early 2020, indicating higher risk or increased financial obligations, then moderated back toward prior levels by the end of 2021.
Overall, the data suggest a period of financial tightening or increased risk exposure leading up to and during early 2020, likely correlated with external economic factors. The subsequent recovery in equity and reduction in leverage indicate efforts to strengthen the financial position and balance sheet health in the subsequent quarters.
Interest Coverage
Illinois Tool Works Inc., interest coverage calculation (quarterly data)
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||
| Net income | |||||||||||||||||||||
| Add: Income tax expense | |||||||||||||||||||||
| Add: Interest expense | |||||||||||||||||||||
| Earnings before interest and tax (EBIT) | |||||||||||||||||||||
| Solvency Ratio | |||||||||||||||||||||
| Interest coverage1 | |||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||
| Interest Coverage, Competitors2 | |||||||||||||||||||||
| Boeing Co. | |||||||||||||||||||||
| Caterpillar Inc. | |||||||||||||||||||||
| Eaton Corp. plc | |||||||||||||||||||||
| GE Aerospace | |||||||||||||||||||||
| Honeywell International Inc. | |||||||||||||||||||||
| Lockheed Martin Corp. | |||||||||||||||||||||
Based on: 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
1 Q4 2021 Calculation
Interest coverage
= (EBITQ4 2021
+ EBITQ3 2021
+ EBITQ2 2021
+ EBITQ1 2021)
÷ (Interest expenseQ4 2021
+ Interest expenseQ3 2021
+ Interest expenseQ2 2021
+ Interest expenseQ1 2021)
= ( + + + )
÷ ( + + + )
=
2 Click competitor name to see calculations.
- EBIT Trend Analysis
- Over the observed period, earnings before interest and tax (EBIT) generally exhibit modest fluctuations with a declining tendency in 2020 followed by a recovery phase in 2021. Initially, EBIT maintained levels close to the low 900 million USD range through 2018 and 2019, with peaks around 958 million USD and troughs near 853 million USD. The first half of 2020 saw a significant decline, hitting a low of 457 million USD in the second quarter, indicative of adverse conditions impacting profitability. Post mid-2020, EBIT began to recover, steadily increasing to reach 917 million USD by the first quarter of 2021 before slightly tapering off towards the end of 2021.
- Interest Expense Analysis
- Interest expense demonstrates a gradual decline throughout the four-year span. Starting at 66 million USD in the first quarter of 2018, the interest expense decreased steadily, fluctuating slightly in the low 50 million USD range during 2019 and 2020. By the end of 2021, interest expenses were recorded at 49 million USD, reflecting improved debt management or lower borrowing costs over time.
- Interest Coverage Ratio Analysis
- The interest coverage ratio shows a generally increasing trend, illustrating enhanced ability to meet interest obligations from operating earnings. Beginning from approximately 13.86 in early 2018, the ratio improved progressively, surpassing 15 by the end of 2019. Although a dip to around 14.13 was noted during 2020, likely due to the EBIT downturn, the metric rebounded strongly in 2021. The ratio reached a peak of 17.47 by the last quarter, signifying strengthened financial stability and reduced risk associated with interest payments.
- Overall Financial Health Implications
- The data indicates resilience and recovery after the notable EBIT contraction in mid-2020. The continuous decrease in interest expense combined with rising interest coverage suggests effective cost control and debt management strategies. The company’s capacity to cover interest expenses from earnings improved significantly by the end of the period, signaling improved operating performance and potentially stronger creditworthiness.