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
Kimberly-Clark Corp., solvency ratios
Based on: 10-K (reporting date: 2020-12-31), 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).
The solvency profile exhibits a combination of stable asset-based leverage and increasing equity-based leverage, accompanied by a strong recovery in debt servicing capacity toward the end of the observed period.
- Leverage and Equity Ratios
- A clear upward trend is observed in the debt to equity and financial leverage ratios. The debt to equity ratio increased from 11.80 in 2017 to 13.36 in 2020, with the inclusion of operating lease liabilities further elevating this figure to 14.25 by 2020. Similarly, financial leverage rose from 24.09 in 2017 to 27.99 in 2020, indicating an increased reliance on debt relative to shareholder equity over time.
- Asset and Capital Structure
- Debt to asset and debt to capital ratios remained relatively stable with a slight downward bias. The debt to assets ratio decreased from 0.52 in 2016 to 0.48 in 2020, suggesting that the proportion of assets financed by debt has diminished slightly. Debt to capital showed minor fluctuations, peaking at 1.04 in 2018 before declining to 0.93 by 2020, reflecting a consistent capital structure approach.
- Coverage and Debt Servicing
- Interest and fixed charge coverage ratios experienced a synchronized decline in 2018, with interest coverage dropping to 8.29 and fixed charge coverage to 4.53. However, a significant recovery followed; by December 31, 2020, the interest coverage ratio reached a period high of 13.19, and the fixed charge coverage ratio recovered to 5.94. This trajectory indicates a strengthened ability to meet fixed financial obligations and service interest payments.
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Debt to Equity
Kimberly-Clark Corp., debt to equity calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Debt payable within one year | 486) | 1,534) | 1,208) | 953) | 1,133) | |
| Long-term debt, excluding payable within one year | 7,878) | 6,213) | 6,247) | 6,472) | 6,439) | |
| Total debt | 8,364) | 7,747) | 7,455) | 7,425) | 7,572) | |
| Total Kimberly-Clark Corporation stockholders’ equity | 626) | (33) | (287) | 629) | (102) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 13.36 | — | — | 11.80 | — | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 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).
1 2020 Calculation
Debt to equity = Total debt ÷ Total Kimberly-Clark Corporation stockholders’ equity
= 8,364 ÷ 626 = 13.36
2 Click competitor name to see calculations.
The organization's solvency profile between 2016 and 2020 is characterized by a steady increase in total debt and significant volatility in stockholders' equity.
- Total Debt Evolution
- Total debt remained relatively stable from 2016 through 2018, fluctuating within a narrow range between 7,425 and 7,572 million US dollars. An upward trend emerged in 2019 and accelerated into 2020, where debt reached a peak of 8,364 million US dollars. This represents a general expansion of the company's total borrowing over the five-year period.
- Equity Position and Volatility
- Stockholders' equity demonstrated extreme instability, alternating between deficit and surplus positions. Negative equity was recorded in 2016, 2018, and 2019, while positive balances were achieved in 2017 and 2020. The most recent transition shows a significant recovery from a deficit of 33 million US dollars in 2019 to a positive balance of 626 million US dollars in 2020.
- Debt to Equity Ratio Interpretation
- The debt to equity ratio was only applicable during years of positive equity. A comparison between December 31, 2017, and December 31, 2020, reveals an increase in the ratio from 11.80 to 13.36. This upward movement indicates that total debt grew at a faster rate than stockholders' equity during the periods of positive capitalization, resulting in higher financial leverage.
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Debt to Equity (including Operating Lease Liability)
Kimberly-Clark Corp., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Debt payable within one year | 486) | 1,534) | 1,208) | 953) | 1,133) | |
| Long-term debt, excluding payable within one year | 7,878) | 6,213) | 6,247) | 6,472) | 6,439) | |
| Total debt | 8,364) | 7,747) | 7,455) | 7,425) | 7,572) | |
| Current operating lease liabilities | 133) | 130) | —) | —) | —) | |
| Noncurrent operating lease liabilities (classified in Other liabilities) | 423) | 274) | —) | —) | —) | |
| Total debt (including operating lease liability) | 8,920) | 8,151) | 7,455) | 7,425) | 7,572) | |
| Total Kimberly-Clark Corporation stockholders’ equity | 626) | (33) | (287) | 629) | (102) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 14.25 | — | — | 11.80 | — | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 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).
1 2020 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Total Kimberly-Clark Corporation stockholders’ equity
= 8,920 ÷ 626 = 14.25
2 Click competitor name to see calculations.
The solvency profile from 2016 to 2020 indicates a progressive increase in total debt coupled with significant volatility in stockholders' equity, leading to an elevated leverage position over the analyzed period.
- Total Debt Obligations
- Total debt, including operating lease liabilities, remained relatively stable between 2016 and 2018, fluctuating within a narrow range of 7.4 to 7.6 billion US dollars. However, a clear upward trajectory began in 2019, with liabilities increasing to 8.15 billion US dollars and reaching 8.92 billion US dollars by December 31, 2020. This trend reflects a consistent expansion of the company's total debt burden in the latter part of the period.
- Equity Volatility
- Stockholders' equity exhibited extreme fluctuations, alternating between positive and negative values. Negative equity positions were recorded in 2016, 2018, and 2019, with the most pronounced deficit of 287 million US dollars occurring in 2018. Positive equity was only observed in 2017 and 2020, with values of 629 million and 626 million US dollars, respectively. This instability suggests a capital structure characterized by significant outflows or adjustments that periodically offset the equity base.
- Debt to Equity Ratio Trends
- The debt to equity ratio is only applicable during years with positive equity, specifically 2017 and 2020. In 2017, the ratio stood at 11.80, which increased to 14.25 by 2020. This upward shift indicates that the growth in total debt outpaced the growth in equity, resulting in a higher reliance on debt financing and a potentially higher risk profile regarding long-term solvency.
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Debt to Capital
Kimberly-Clark Corp., debt to capital calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Debt payable within one year | 486) | 1,534) | 1,208) | 953) | 1,133) | |
| Long-term debt, excluding payable within one year | 7,878) | 6,213) | 6,247) | 6,472) | 6,439) | |
| Total debt | 8,364) | 7,747) | 7,455) | 7,425) | 7,572) | |
| Total Kimberly-Clark Corporation stockholders’ equity | 626) | (33) | (287) | 629) | (102) | |
| Total capital | 8,990) | 7,714) | 7,168) | 8,054) | 7,470) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.93 | 1.00 | 1.04 | 0.92 | 1.01 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 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).
1 2020 Calculation
Debt to capital = Total debt ÷ Total capital
= 8,364 ÷ 8,990 = 0.93
2 Click competitor name to see calculations.
The solvency profile from 2016 to 2020 is characterized by fluctuating leverage levels and a general expansion of both total debt and total capital toward the end of the analyzed period.
- Total Debt Trends
- Total debt remained relatively stable between 2016 and 2018, with a slight decrease in 2017 followed by a minor recovery. A more pronounced upward trajectory began in 2019, culminating in a significant increase to 8,364 million USD by December 31, 2020.
- Total Capital Volatility
- Total capital exhibited notable variability. After increasing in 2017, it experienced a contraction in 2018 to 7,168 million USD. This was followed by a consistent recovery phase, reaching a five-year peak of 8,990 million USD by the end of 2020.
- Debt to Capital Ratio Analysis
- The debt to capital ratio fluctuated around the 1.00 mark, indicating a capital structure where total debt frequently equaled or exceeded the total capital base. The ratio reached its highest point of 1.04 in 2018, suggesting peak relative leverage. Conversely, the lowest ratios were recorded in 2017 (0.92) and 2020 (0.93). The decrease to 0.93 in 2020 indicates that total capital grew at a faster rate than total debt during the final year of the period.
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Debt to Capital (including Operating Lease Liability)
Kimberly-Clark Corp., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Debt payable within one year | 486) | 1,534) | 1,208) | 953) | 1,133) | |
| Long-term debt, excluding payable within one year | 7,878) | 6,213) | 6,247) | 6,472) | 6,439) | |
| Total debt | 8,364) | 7,747) | 7,455) | 7,425) | 7,572) | |
| Current operating lease liabilities | 133) | 130) | —) | —) | —) | |
| Noncurrent operating lease liabilities (classified in Other liabilities) | 423) | 274) | —) | —) | —) | |
| Total debt (including operating lease liability) | 8,920) | 8,151) | 7,455) | 7,425) | 7,572) | |
| Total Kimberly-Clark Corporation stockholders’ equity | 626) | (33) | (287) | 629) | (102) | |
| Total capital (including operating lease liability) | 9,546) | 8,118) | 7,168) | 8,054) | 7,470) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.93 | 1.00 | 1.04 | 0.92 | 1.01 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 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).
1 2020 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 8,920 ÷ 9,546 = 0.93
2 Click competitor name to see calculations.
Analysis of solvency indicators from 2016 to 2020 reveals a general increase in both total debt and total capital, with the debt-to-capital ratio remaining consistently near or above parity throughout the period.
- Total Debt Trends
- Total debt, including operating lease liabilities, exhibited a general upward trajectory. After a marginal decrease from 7,572 million USD in 2016 to 7,425 million USD in 2017, debt levels rose steadily for three consecutive years, reaching 8,920 million USD by December 31, 2020. This represents an overall increase of approximately 17.8% over the five-year span.
- Total Capital Fluctuations
- Total capital demonstrated higher volatility than total debt. A notable contraction occurred in 2018, where capital fell to 7,168 million USD, marking the lowest point in the observed timeframe. This was followed by a significant expansion, with total capital rising to 9,546 million USD by the end of 2020, indicating a substantial increase in the capital base during the final two years of the analysis.
- Debt to Capital Ratio Interpretation
- The debt to capital ratio fluctuated within a narrow range, peaking at 1.04 in 2018 and reaching a low of 0.92 in 2017. Values exceeding 1.00 in 2016 and 2018 indicate periods where total debt surpassed total capital. By December 31, 2020, the ratio settled at 0.93, suggesting that while absolute debt increased, the concurrent growth in total capital helped stabilize the leverage proportion relative to the 2018 peak.
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Debt to Assets
Kimberly-Clark Corp., debt to assets calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Debt payable within one year | 486) | 1,534) | 1,208) | 953) | 1,133) | |
| Long-term debt, excluding payable within one year | 7,878) | 6,213) | 6,247) | 6,472) | 6,439) | |
| Total debt | 8,364) | 7,747) | 7,455) | 7,425) | 7,572) | |
| Total assets | 17,523) | 15,283) | 14,518) | 15,151) | 14,602) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.48 | 0.51 | 0.51 | 0.49 | 0.52 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 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).
1 2020 Calculation
Debt to assets = Total debt ÷ Total assets
= 8,364 ÷ 17,523 = 0.48
2 Click competitor name to see calculations.
Between 2016 and 2020, the solvency profile exhibits a state of relative stability, with the debt-to-assets ratio remaining within a narrow corridor of 0.48 to 0.52. While both total debt and total assets experienced growth toward the end of the period, the overall leverage proportion trended slightly downward.
- Total Debt Dynamics
- Total debt remained relatively flat between 2016 and 2018, fluctuating minimally around the 7.4 billion to 7.6 billion range. A gradual upward trend commenced in 2019, culminating in a more pronounced increase to 8,364 million by December 31, 2020.
- Total Asset Evolution
- Total assets demonstrated volatility in the first three years, decreasing in 2018 before recovering in 2019. A significant expansion occurred in 2020, where assets rose to 17,523 million, representing a substantial increase in the organization's resource base.
- Debt to Assets Ratio Analysis
- The ratio decreased from 0.52 in 2016 to 0.48 in 2020. Notably, in 2020, the ratio reached its lowest point in the five-year period despite the nominal increase in total debt. This indicates that asset growth significantly outpaced the accumulation of new debt during that fiscal year, thereby improving the overall solvency position relative to total resources.
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Debt to Assets (including Operating Lease Liability)
Kimberly-Clark Corp., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Debt payable within one year | 486) | 1,534) | 1,208) | 953) | 1,133) | |
| Long-term debt, excluding payable within one year | 7,878) | 6,213) | 6,247) | 6,472) | 6,439) | |
| Total debt | 8,364) | 7,747) | 7,455) | 7,425) | 7,572) | |
| Current operating lease liabilities | 133) | 130) | —) | —) | —) | |
| Noncurrent operating lease liabilities (classified in Other liabilities) | 423) | 274) | —) | —) | —) | |
| Total debt (including operating lease liability) | 8,920) | 8,151) | 7,455) | 7,425) | 7,572) | |
| Total assets | 17,523) | 15,283) | 14,518) | 15,151) | 14,602) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.51 | 0.53 | 0.51 | 0.49 | 0.52 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 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).
1 2020 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 8,920 ÷ 17,523 = 0.51
2 Click competitor name to see calculations.
The solvency profile from 2016 to 2020 demonstrates a consistent approach to capital structure, characterized by a stable balance between total liabilities and total assets.
- Debt Accumulation Trends
- Total debt, including operating lease liabilities, remained relatively flat between 2016 and 2018, fluctuating slightly between 7.4 and 7.6 billion USD. A notable upward trend emerged starting in 2019, with liabilities rising to 8.15 billion USD and further increasing to 8.92 billion USD by the end of 2020.
- Asset Base Expansion
- Total assets showed moderate volatility through 2019, ranging from 14.5 billion to 15.3 billion USD. A significant expansion was recorded in 2020, where total assets increased to 17.52 billion USD, marking the highest value in the analyzed period.
- Debt to Assets Ratio Analysis
- The debt to assets ratio remained remarkably stable over the five-year period, oscillating within a narrow band between 0.49 and 0.53. Despite the absolute increase in debt levels toward the end of the period, the concurrent growth in the asset base offset the additional liabilities, maintaining a consistent leverage position of approximately 51% of assets financed by debt.
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Financial Leverage
Kimberly-Clark Corp., financial leverage calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 17,523) | 15,283) | 14,518) | 15,151) | 14,602) | |
| Total Kimberly-Clark Corporation stockholders’ equity | 626) | (33) | (287) | 629) | (102) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 27.99 | — | — | 24.09 | — | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 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).
1 2020 Calculation
Financial leverage = Total assets ÷ Total Kimberly-Clark Corporation stockholders’ equity
= 17,523 ÷ 626 = 27.99
2 Click competitor name to see calculations.
The financial position is characterized by significant volatility in stockholders' equity and a high degree of financial leverage. While total assets maintained a general upward trajectory over the five-year period, the equity base fluctuated between deficit and positive positions, indicating an aggressive capital management strategy.
- Asset Growth
- Total assets increased from US$ 14,602 million in 2016 to US$ 17,523 million by 2020. A notable acceleration in asset accumulation occurred between 2019 and 2020, where assets grew by approximately 14.6% in a single year.
- Equity Volatility
- Stockholders' equity exhibited instability, recording negative values in 2016, 2018, and 2019. This pattern suggests that liabilities exceeded assets during those periods, a condition typically associated with substantial treasury stock acquisitions or dividend distributions that exceed retained earnings.
- Financial Leverage Trends
- The financial leverage ratio demonstrates an increasing trend, rising from 24.09 in 2017 to 27.99 in 2020. This elevation indicates a heightened reliance on borrowed funds relative to equity to finance the asset base, resulting in an increased solvency risk profile.
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Interest Coverage
Kimberly-Clark Corp., interest coverage calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Kimberly-Clark Corporation | 2,352) | 2,157) | 1,410) | 2,278) | 2,166) | |
| Add: Net income attributable to noncontrolling interest | 44) | 40) | 35) | 41) | 53) | |
| Add: Income tax expense | 676) | 576) | 471) | 776) | 922) | |
| Add: Interest expense | 252) | 261) | 263) | 318) | 319) | |
| Earnings before interest and tax (EBIT) | 3,324) | 3,034) | 2,179) | 3,413) | 3,460) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 13.19 | 11.62 | 8.29 | 10.73 | 10.85 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 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).
1 2020 Calculation
Interest coverage = EBIT ÷ Interest expense
= 3,324 ÷ 252 = 13.19
2 Click competitor name to see calculations.
The analysis of solvency metrics from 2016 to 2020 reveals a strong and improving capacity to meet interest obligations. While a period of volatility occurred in 2018, the overall trend indicates an increase in the margin of safety for creditors, culminating in a peak coverage ratio by the end of the observed period.
- Earnings Before Interest and Tax (EBIT) Trends
- Operating earnings experienced significant fluctuation. After maintaining stability between 2016 and 2017, EBIT saw a sharp decline in 2018, falling to 2,179 million USD. This was followed by a consistent recovery phase, with earnings increasing to 3,034 million USD in 2019 and further rising to 3,324 million USD in 2020.
- Interest Expense Management
- A consistent downward trend is observed in interest expenses over the five-year horizon. Costs decreased from 319 million USD in 2016 to 252 million USD in 2020. The most notable reduction occurred between 2017 and 2018, suggesting a strategic reduction in debt levels or a favorable shift in interest rate environments.
- Interest Coverage Ratio Analysis
- The interest coverage ratio mirrored the volatility of EBIT but was supported by the declining interest expense. The ratio decreased from 10.85 in 2016 to a low of 8.29 in 2018. However, the combination of recovering operating income and lower interest costs led to a rapid improvement, with the ratio reaching 11.62 in 2019 and 13.19 in 2020, indicating an strengthened solvency position.
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Fixed Charge Coverage
Kimberly-Clark Corp., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Kimberly-Clark Corporation | 2,352) | 2,157) | 1,410) | 2,278) | 2,166) | |
| Add: Net income attributable to noncontrolling interest | 44) | 40) | 35) | 41) | 53) | |
| Add: Income tax expense | 676) | 576) | 471) | 776) | 922) | |
| Add: Interest expense | 252) | 261) | 263) | 318) | 319) | |
| Earnings before interest and tax (EBIT) | 3,324) | 3,034) | 2,179) | 3,413) | 3,460) | |
| Add: Operating lease cost | 370) | 307) | 280) | 281) | 271) | |
| Earnings before fixed charges and tax | 3,694) | 3,341) | 2,459) | 3,694) | 3,731) | |
| Interest expense | 252) | 261) | 263) | 318) | 319) | |
| Operating lease cost | 370) | 307) | 280) | 281) | 271) | |
| Fixed charges | 622) | 568) | 543) | 599) | 590) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 5.94 | 5.88 | 4.53 | 6.17 | 6.32 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 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).
1 2020 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 3,694 ÷ 622 = 5.94
2 Click competitor name to see calculations.
The analysis of fixed charge coverage from 2016 to 2020 reveals a period of general stability punctuated by a notable decline in 2018, followed by a consistent recovery. The solvency position remained strong throughout the period, as the capacity to meet fixed obligations consistently and substantially exceeded the required payments.
- Earnings Before Fixed Charges and Tax
- Operating earnings exhibited significant volatility over the five-year window. After remaining relatively stable between 2016 and 2017, earnings experienced a sharp contraction in 2018, falling from 3,694 million USD to 2,459 million USD. A strong recovery trend emerged in the subsequent two years, with earnings rebounding to 3,341 million USD in 2019 and returning to 3,694 million USD by the end of 2020.
- Fixed Charges
- Fixed obligations remained relatively constant, fluctuating within a narrow range between 543 million USD and 622 million USD. A slight reduction in charges occurred during the 2018 downturn, while the highest expenditure was recorded in 2020 at 622 million USD.
- Fixed Charge Coverage Ratio
- The coverage ratio mirrored the volatility of earnings, decreasing from 6.32 in 2016 to a period low of 4.53 in 2018. This decline was primarily driven by the reduction in earnings rather than an increase in fixed costs. By 2020, the ratio recovered to 5.94, indicating a restored margin of safety and a robust ability to service fixed financial obligations.
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