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
Northrop Grumman Corp., solvency ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
Analysis of the solvency metrics indicates a progressive strengthening of the balance sheet between 2018 and 2022. There is a consistent reduction in long-term debt reliance and an improvement in the capacity to service financial obligations.
- Debt Leverage Ratios
- A steady downward trend is observed in debt leverage across all primary metrics. The debt to equity ratio decreased from 1.76 in 2018 to 0.84 in 2022. When including operating lease liabilities, the ratio moved from 1.76 to 0.98 over the same period. Similarly, the debt to assets ratio declined from 0.38 to 0.29, and the debt to capital ratio fell from 0.64 to 0.46, indicating a systematic reduction in the proportion of assets and capital funded by debt.
- Financial Leverage
- The financial leverage ratio showed a slight increase from 4.60 in 2018 to 4.66 in 2019, followed by a significant and consistent decline to 2.86 by the end of 2022. This contraction suggests a transition toward a more conservative capital structure and reduced financial risk.
- Coverage Capacity
- Solvency margins related to interest and fixed charges have improved substantially. Interest coverage rose from 7.66 in 2018 to a peak of 17.08 in 2021, before normalizing to 12.53 in 2022. Fixed charge coverage followed a similar trajectory, increasing from 4.99 in 2018 to 7.96 in 2022. These trends demonstrate a heightened ability to meet fixed financial obligations from operating earnings.
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Debt to Equity
Northrop Grumman Corp., debt to equity calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term debt | 1,072) | 6) | 742) | 1,109) | 517) | |
| Long-term debt, net of current portion | 11,805) | 12,777) | 14,261) | 12,770) | 13,883) | |
| Total debt | 12,877) | 12,783) | 15,003) | 13,879) | 14,400) | |
| Shareholders’ equity | 15,312) | 12,926) | 10,579) | 8,819) | 8,187) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.84 | 0.99 | 1.42 | 1.57 | 1.76 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.33 | 2.29 | — | — | — | |
| Eaton Corp. plc | 0.51 | 0.52 | — | — | — | |
| GE Aerospace | 0.89 | 0.87 | — | — | — | |
| Honeywell International Inc. | 1.17 | 1.06 | — | — | — | |
| Lockheed Martin Corp. | 1.68 | 1.07 | — | — | — | |
| RTX Corp. | 0.44 | 0.43 | — | — | — | |
| Debt to Equity, Sector | ||||||
| Capital Goods | 1.33 | 1.26 | — | — | — | |
| Debt to Equity, Industry | ||||||
| Industrials | 1.42 | 1.37 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to equity = Total debt ÷ Shareholders’ equity
= 12,877 ÷ 15,312 = 0.84
2 Click competitor name to see calculations.
An analysis of the solvency position from 2018 to 2022 reveals a consistent strengthening of the financial structure, characterized by a significant reduction in financial leverage and a substantial increase in the equity base.
- Total Debt Trends
- Total debt exhibited moderate volatility over the five-year period. After a slight decrease in 2019 and a peak of 15,003 million USD in 2020, debt levels declined sharply in 2021 to 12,783 million USD, remaining relatively stable at 12,877 million USD by the end of 2022. The overall trajectory indicates a successful effort to manage and reduce total liabilities relative to the 2018 baseline.
- Shareholders' Equity Growth
- A strong and uninterrupted upward trend is observed in shareholders' equity. Starting at 8,187 million USD in 2018, the equity grew annually, reaching 15,312 million USD by December 31, 2022. This represents a nearly twofold increase in the company's net assets over the period, providing a robust cushion for creditors and increasing the internal funding capacity.
- Debt to Equity Ratio Analysis
- The debt to equity ratio demonstrates a continuous downward trajectory, falling from 1.76 in 2018 to 0.84 in 2022. A critical inflection point occurred between 2020 and 2021, where the ratio dropped below 1.0, signaling a shift where equity surpassed total debt. This steady decline reflects a strategic move toward a less leveraged capital structure, significantly improving the long-term solvency profile and reducing the financial risk associated with debt obligations.
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Debt to Equity (including Operating Lease Liability)
Northrop Grumman Corp., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term debt | 1,072) | 6) | 742) | 1,109) | 517) | |
| Long-term debt, net of current portion | 11,805) | 12,777) | 14,261) | 12,770) | 13,883) | |
| Total debt | 12,877) | 12,783) | 15,003) | 13,879) | 14,400) | |
| Current operating lease liabilities (included in Other current liabilities) | 299) | 284) | 263) | 261) | —) | |
| Non-current operating lease liabilities | 1,824) | 1,590) | 1,343) | 1,308) | —) | |
| Total debt (including operating lease liability) | 15,000) | 14,657) | 16,609) | 15,448) | 14,400) | |
| Shareholders’ equity | 15,312) | 12,926) | 10,579) | 8,819) | 8,187) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 0.98 | 1.13 | 1.57 | 1.75 | 1.76 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.37 | 2.33 | — | — | — | |
| Eaton Corp. plc | 0.54 | 0.55 | — | — | — | |
| GE Aerospace | 0.96 | 0.94 | — | — | — | |
| Honeywell International Inc. | 1.23 | 1.11 | — | — | — | |
| Lockheed Martin Corp. | 1.81 | 1.19 | — | — | — | |
| RTX Corp. | 0.47 | 0.46 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 1.39 | 1.32 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Industrials | 1.59 | 1.54 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Shareholders’ equity
= 15,000 ÷ 15,312 = 0.98
2 Click competitor name to see calculations.
Analysis of the solvency profile reveals a consistent improvement in the company's financial leverage between 2018 and 2022. The most prominent trend is the steady reduction of the debt-to-equity ratio, which shifted from a position of high leverage to a more conservative capital structure.
- Debt to Equity Trend
- The debt to equity ratio, inclusive of operating lease liabilities, demonstrated a continuous decline from 1.76 in 2018 to 0.98 in 2022. This trajectory indicates a strategic shift toward a stronger solvency position, culminating in a ratio below 1.0 by the end of the period, signifying that shareholders' equity now exceeds total debt.
- Shareholders' Equity Growth
- A primary driver of the improved solvency ratio was the robust and uninterrupted growth in shareholders' equity. Equity increased from 8,187 million US dollars in 2018 to 15,312 million US dollars in 2022, representing a substantial expansion of the company's internal funding base and a reduction in reliance on external borrowing.
- Total Debt Dynamics
- Total debt, including operating lease liabilities, exhibited more volatility than equity. Debt levels rose from 14,400 million US dollars in 2018 to a peak of 16,609 million US dollars in 2020, before declining to 14,657 million US dollars in 2021 and ending at 15,000 million US dollars in 2022. The combination of stabilizing debt levels and accelerating equity growth directly contributed to the marked reduction in overall financial risk.
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Debt to Capital
Northrop Grumman Corp., debt to capital calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term debt | 1,072) | 6) | 742) | 1,109) | 517) | |
| Long-term debt, net of current portion | 11,805) | 12,777) | 14,261) | 12,770) | 13,883) | |
| Total debt | 12,877) | 12,783) | 15,003) | 13,879) | 14,400) | |
| Shareholders’ equity | 15,312) | 12,926) | 10,579) | 8,819) | 8,187) | |
| Total capital | 28,189) | 25,709) | 25,582) | 22,698) | 22,587) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.46 | 0.50 | 0.59 | 0.61 | 0.64 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Boeing Co. | 1.39 | 1.35 | — | — | — | |
| Caterpillar Inc. | 0.70 | 0.70 | — | — | — | |
| Eaton Corp. plc | 0.34 | 0.34 | — | — | — | |
| GE Aerospace | 0.47 | 0.47 | — | — | — | |
| Honeywell International Inc. | 0.54 | 0.51 | — | — | — | |
| Lockheed Martin Corp. | 0.63 | 0.52 | — | — | — | |
| RTX Corp. | 0.31 | 0.30 | — | — | — | |
| Debt to Capital, Sector | ||||||
| Capital Goods | 0.57 | 0.56 | — | — | — | |
| Debt to Capital, Industry | ||||||
| Industrials | 0.59 | 0.58 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to capital = Total debt ÷ Total capital
= 12,877 ÷ 28,189 = 0.46
2 Click competitor name to see calculations.
A consistent improvement in the solvency profile is evident between 2018 and 2022, characterized by a systematic reduction in the proportion of debt relative to total capital. This trend indicates a strategic shift toward a more conservative capital structure and reduced financial leverage.
- Total Debt Trajectory
- Total debt exhibited fluctuations during the period, starting at 14,400 million in 2018 and peaking at 15,003 million in 2020. A significant reduction followed in 2021, with the balance ending at 12,877 million in 2022. This represents a net decrease in absolute debt levels over the five-year window.
- Total Capital Expansion
- Total capital demonstrated a steady upward trajectory, increasing from 22,587 million in 2018 to 28,189 million in 2022. The continuous growth of the capital base, occurring alongside the general reduction in debt, suggests an expansion of equity or other non-debt capital components.
- Debt to Capital Ratio Analysis
- The debt to capital ratio shows a persistent downward trend, declining annually from 0.64 in 2018 to 0.46 in 2022. This steady decline reflects a strengthening of the balance sheet, as the company has successfully lowered its reliance on borrowed funds to finance its operations and assets.
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Debt to Capital (including Operating Lease Liability)
Northrop Grumman Corp., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term debt | 1,072) | 6) | 742) | 1,109) | 517) | |
| Long-term debt, net of current portion | 11,805) | 12,777) | 14,261) | 12,770) | 13,883) | |
| Total debt | 12,877) | 12,783) | 15,003) | 13,879) | 14,400) | |
| Current operating lease liabilities (included in Other current liabilities) | 299) | 284) | 263) | 261) | —) | |
| Non-current operating lease liabilities | 1,824) | 1,590) | 1,343) | 1,308) | —) | |
| Total debt (including operating lease liability) | 15,000) | 14,657) | 16,609) | 15,448) | 14,400) | |
| Shareholders’ equity | 15,312) | 12,926) | 10,579) | 8,819) | 8,187) | |
| Total capital (including operating lease liability) | 30,312) | 27,583) | 27,188) | 24,267) | 22,587) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.49 | 0.53 | 0.61 | 0.64 | 0.64 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 1.37 | 1.34 | — | — | — | |
| Caterpillar Inc. | 0.70 | 0.70 | — | — | — | |
| Eaton Corp. plc | 0.35 | 0.36 | — | — | — | |
| GE Aerospace | 0.49 | 0.49 | — | — | — | |
| Honeywell International Inc. | 0.55 | 0.53 | — | — | — | |
| Lockheed Martin Corp. | 0.64 | 0.54 | — | — | — | |
| RTX Corp. | 0.32 | 0.31 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.58 | 0.57 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.61 | 0.61 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 15,000 ÷ 30,312 = 0.49
2 Click competitor name to see calculations.
The solvency profile exhibits a consistent improvement in the capital structure from 2018 to 2022, characterized by a systematic reduction in the reliance on debt relative to total capital.
- Debt to Capital Ratio Trend
- The ratio remained stable at 0.64 between 2018 and 2019 before entering a period of steady decline. By December 31, 2022, the ratio reached 0.49, representing a total decrease of 15 percentage points over the five-year period. This trajectory indicates a strategic shift toward a more conservative leverage position and enhanced long-term solvency.
- Total Debt Dynamics
- Total debt, inclusive of operating lease liabilities, experienced an upward trend in the early part of the period, increasing from US$ 14,400 million in 2018 to a peak of US$ 16,609 million in 2020. A significant contraction occurred in 2021, with debt falling to US$ 14,657 million, followed by a slight increase to US$ 15,000 million by the end of 2022.
- Total Capital Expansion
- Total capital grew consistently and monotonically throughout the analyzed period, rising from US$ 22,587 million in 2018 to US$ 30,312 million in 2022. The sustained expansion of the capital base, coupled with the stabilization of total debt levels after 2020, acted as the primary driver for the improvement in the solvency ratio.
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Debt to Assets
Northrop Grumman Corp., debt to assets calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term debt | 1,072) | 6) | 742) | 1,109) | 517) | |
| Long-term debt, net of current portion | 11,805) | 12,777) | 14,261) | 12,770) | 13,883) | |
| Total debt | 12,877) | 12,783) | 15,003) | 13,879) | 14,400) | |
| Total assets | 43,755) | 42,579) | 44,469) | 41,089) | 37,653) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.29 | 0.30 | 0.34 | 0.34 | 0.38 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Boeing Co. | 0.42 | 0.42 | — | — | — | |
| Caterpillar Inc. | 0.45 | 0.46 | — | — | — | |
| Eaton Corp. plc | 0.25 | 0.25 | — | — | — | |
| GE Aerospace | 0.17 | 0.18 | — | — | — | |
| Honeywell International Inc. | 0.31 | 0.30 | — | — | — | |
| Lockheed Martin Corp. | 0.29 | 0.23 | — | — | — | |
| RTX Corp. | 0.20 | 0.20 | — | — | — | |
| Debt to Assets, Sector | ||||||
| Capital Goods | 0.28 | 0.28 | — | — | — | |
| Debt to Assets, Industry | ||||||
| Industrials | 0.31 | 0.30 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to assets = Total debt ÷ Total assets
= 12,877 ÷ 43,755 = 0.29
2 Click competitor name to see calculations.
The solvency profile exhibits a sustained improvement over the analyzed five-year period, characterized by a consistent reduction in the reliance on debt to finance assets. The overall trend indicates a strengthening of the balance sheet and a decreased risk profile regarding long-term obligations.
- Debt to Assets Ratio Trend
- The ratio declined steadily from 0.38 in 2018 to 0.29 by the end of 2022. A period of stability was observed between 2019 and 2020, where the ratio remained constant at 0.34, followed by a more pronounced downward trajectory in 2021 and 2022, signaling a lower proportion of assets being financed through debt.
- Total Debt Dynamics
- Total debt experienced fluctuations, starting at 14,400 million USD in 2018 and peaking at 15,003 million USD in 2020. A significant reduction occurred in 2021, with debt levels falling to 12,783 million USD, remaining relatively stable at 12,877 million USD in 2022.
- Total Asset Evolution
- Total assets grew from 37,653 million USD in 2018 to a peak of 44,469 million USD in 2020. Despite a slight contraction to 42,579 million USD in 2021, the asset base recovered to 43,755 million USD by 2022. The general expansion of the asset base, paired with the reduction in total debt after 2020, served as the primary driver for the improvement in the solvency ratio.
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Debt to Assets (including Operating Lease Liability)
Northrop Grumman Corp., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term debt | 1,072) | 6) | 742) | 1,109) | 517) | |
| Long-term debt, net of current portion | 11,805) | 12,777) | 14,261) | 12,770) | 13,883) | |
| Total debt | 12,877) | 12,783) | 15,003) | 13,879) | 14,400) | |
| Current operating lease liabilities (included in Other current liabilities) | 299) | 284) | 263) | 261) | —) | |
| Non-current operating lease liabilities | 1,824) | 1,590) | 1,343) | 1,308) | —) | |
| Total debt (including operating lease liability) | 15,000) | 14,657) | 16,609) | 15,448) | 14,400) | |
| Total assets | 43,755) | 42,579) | 44,469) | 41,089) | 37,653) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.34 | 0.34 | 0.37 | 0.38 | 0.38 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 0.43 | 0.43 | — | — | — | |
| Caterpillar Inc. | 0.46 | 0.46 | — | — | — | |
| Eaton Corp. plc | 0.26 | 0.27 | — | — | — | |
| GE Aerospace | 0.19 | 0.19 | — | — | — | |
| Honeywell International Inc. | 0.33 | 0.32 | — | — | — | |
| Lockheed Martin Corp. | 0.32 | 0.26 | — | — | — | |
| RTX Corp. | 0.21 | 0.21 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.30 | 0.29 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.34 | 0.34 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 15,000 ÷ 43,755 = 0.34
2 Click competitor name to see calculations.
An analysis of solvency indicators reveals a period of relative stability with a gradual improvement in the leverage position between 2018 and 2022. The overall trend indicates a controlled approach to debt accumulation relative to the growth and fluctuations of the total asset base.
- Total Debt Dynamics
- Total debt, including operating lease liabilities, exhibited an upward trend from 2018 through 2020, rising from US$ 14,400 million to a peak of US$ 16,609 million. A notable reduction occurred in 2021, where debt decreased to US$ 14,657 million, followed by a marginal increase to US$ 15,000 million by the end of 2022.
- Total Asset Performance
- Assets grew consistently from December 31, 2018, at US$ 37,653 million, to a peak of US$ 44,469 million in 2020. A contraction was observed in 2021, with assets falling to US$ 42,579 million, before recovering to US$ 43,755 million in 2022.
- Debt to Assets Ratio Trend
- The debt to assets ratio remained constant at 0.38 during 2018 and 2019, followed by a slight decrease to 0.37 in 2020. A more pronounced decline to 0.34 was observed in 2021 and maintained through 2022. This downward trajectory signifies a reduction in financial leverage, indicating that a smaller proportion of the asset base is financed through debt toward the end of the five-year period.
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Financial Leverage
Northrop Grumman Corp., financial leverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 43,755) | 42,579) | 44,469) | 41,089) | 37,653) | |
| Shareholders’ equity | 15,312) | 12,926) | 10,579) | 8,819) | 8,187) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 2.86 | 3.29 | 4.20 | 4.66 | 4.60 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 5.16 | 5.02 | — | — | — | |
| Eaton Corp. plc | 2.06 | 2.07 | — | — | — | |
| GE Aerospace | 5.16 | 4.93 | — | — | — | |
| Honeywell International Inc. | 3.73 | 3.47 | — | — | — | |
| Lockheed Martin Corp. | 5.71 | 4.64 | — | — | — | |
| RTX Corp. | 2.19 | 2.21 | — | — | — | |
| Financial Leverage, Sector | ||||||
| Capital Goods | 4.71 | 4.55 | — | — | — | |
| Financial Leverage, Industry | ||||||
| Industrials | 4.65 | 4.52 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Financial leverage = Total assets ÷ Shareholders’ equity
= 43,755 ÷ 15,312 = 2.86
2 Click competitor name to see calculations.
Between 2018 and 2022, a significant shift in the capital structure occurred, characterized by a substantial expansion of shareholders' equity and a corresponding reduction in financial leverage. This trend indicates a strategic movement toward a more conservative financial position and an enhanced solvency profile.
- Total Asset Trajectory
- Total assets grew steadily from 37,653 million US$ in 2018 to a peak of 44,469 million US$ in 2020. A slight contraction was observed in 2021, followed by a recovery to 43,755 million US$ by the end of 2022, suggesting a period of asset stabilization after initial growth.
- Shareholders' Equity Expansion
- A consistent and aggressive upward trend is evident in shareholders' equity, which increased from 8,187 million US$ in 2018 to 15,312 million US$ in 2022. The steady annual growth in equity suggests strong retained earnings or capital contributions, effectively increasing the company's internal funding base.
- Financial Leverage Analysis
- The financial leverage ratio exhibits a marked downward trend, particularly after 2019. Following a peak of 4.66 in 2019, the ratio decreased to 4.20 in 2020, 3.29 in 2021, and finally to 2.86 in 2022. Because equity growth significantly outpaced asset growth during this period, the company's reliance on debt to finance its assets diminished, resulting in a lower risk profile regarding long-term solvency.
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Interest Coverage
Northrop Grumman Corp., interest coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings | 4,896) | 7,005) | 3,189) | 2,248) | 3,229) | |
| Add: Income tax expense | 940) | 1,933) | 539) | 300) | 513) | |
| Add: Interest expense | 506) | 556) | 593) | 528) | 562) | |
| Earnings before interest and tax (EBIT) | 6,342) | 9,494) | 4,321) | 3,076) | 4,304) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 12.53 | 17.08 | 7.29 | 5.83 | 7.66 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Boeing Co. | -0.98 | -0.88 | — | — | — | |
| Caterpillar Inc. | 20.80 | 17.88 | — | — | — | |
| Eaton Corp. plc | 21.22 | 21.11 | — | — | — | |
| GE Aerospace | 1.88 | -0.96 | — | — | — | |
| Honeywell International Inc. | 16.41 | 22.09 | — | — | — | |
| Lockheed Martin Corp. | 11.72 | 14.27 | — | — | — | |
| RTX Corp. | 5.64 | 4.71 | — | — | — | |
| Interest Coverage, Sector | ||||||
| Capital Goods | 4.84 | 3.98 | — | — | — | |
| Interest Coverage, Industry | ||||||
| Industrials | 4.98 | 5.14 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Interest coverage = EBIT ÷ Interest expense
= 6,342 ÷ 506 = 12.53
2 Click competitor name to see calculations.
The solvency profile from 2018 to 2022 demonstrates a consistent and robust capacity to meet interest obligations, characterized by a significant expansion in coverage capacity that peaked in 2021.
- Earnings Before Interest and Tax (EBIT)
- Operational profitability exhibited notable volatility over the five-year period. A decrease was observed from US$ 4,304 million in 2018 to US$ 3,076 million in 2019, followed by a recovery to US$ 4,321 million in 2020. A substantial surge occurred in 2021, with EBIT reaching US$ 9,494 million, before correcting to US$ 6,342 million in 2022.
- Interest Expense
- Interest costs remained relatively stable throughout the analyzed timeframe, fluctuating within a narrow range between US$ 506 million and US$ 593 million. A slight downward trend is observable in the final year, with expenses reaching a period low of US$ 506 million in 2022.
- Interest Coverage Ratio
- The interest coverage ratio closely mirrored the fluctuations in EBIT due to the stability of interest expenses. The ratio declined from 7.66 in 2018 to a period low of 5.83 in 2019, subsequently rising to a peak of 17.08 in 2021. While the ratio moderated to 12.53 in 2022, the overall solvency position remained significantly stronger than the baseline levels observed between 2018 and 2020.
The convergence of stabilizing interest expenses and elevated operational earnings since 2020 indicates a strengthened financial cushion, reducing the risk associated with debt servicing.
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Fixed Charge Coverage
Northrop Grumman Corp., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings | 4,896) | 7,005) | 3,189) | 2,248) | 3,229) | |
| Add: Income tax expense | 940) | 1,933) | 539) | 300) | 513) | |
| Add: Interest expense | 506) | 556) | 593) | 528) | 562) | |
| Earnings before interest and tax (EBIT) | 6,342) | 9,494) | 4,321) | 3,076) | 4,304) | |
| Add: Operating lease cost | 332) | 315) | 320) | 318) | 375) | |
| Earnings before fixed charges and tax | 6,674) | 9,809) | 4,641) | 3,394) | 4,679) | |
| Interest expense | 506) | 556) | 593) | 528) | 562) | |
| Operating lease cost | 332) | 315) | 320) | 318) | 375) | |
| Fixed charges | 838) | 871) | 913) | 846) | 937) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 7.96 | 11.26 | 5.08 | 4.01 | 4.99 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Boeing Co. | -0.70 | -0.64 | — | — | — | |
| Caterpillar Inc. | 14.92 | 12.73 | — | — | — | |
| Eaton Corp. plc | 10.01 | 10.40 | — | — | — | |
| GE Aerospace | 1.35 | -0.22 | — | — | — | |
| Honeywell International Inc. | 11.00 | 13.67 | — | — | — | |
| Lockheed Martin Corp. | 8.44 | 9.95 | — | — | — | |
| RTX Corp. | 4.40 | 3.66 | — | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Capital Goods | 3.61 | 3.06 | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Industrials | 3.30 | 3.44 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 6,674 ÷ 838 = 7.96
2 Click competitor name to see calculations.
The analysis of solvency ratios indicates a strong overall ability to meet fixed obligations, characterized by significant volatility in earnings against a stable backdrop of fixed costs.
- Earnings Before Fixed Charges and Tax
- Earnings exhibited substantial fluctuation over the five-year period. After a decline from US$ 4,679 million in 2018 to US$ 3,394 million in 2019, a strong upward trajectory was observed, culminating in a peak of US$ 9,809 million in 2021. Although earnings moderated to US$ 6,674 million in 2022, the level remained significantly higher than the 2018-2020 average.
- Fixed Charge Obligations
- Fixed charges remained remarkably stable, ranging from a high of US$ 937 million in 2018 to a low of US$ 838 million in 2022. This stability suggests a consistent debt service structure and a lack of significant new fixed-cost burdens during the period analyzed.
- Fixed Charge Coverage Ratio
- The coverage ratio closely mirrored the volatility of earnings due to the consistency of fixed charges. The ratio dipped to 4.01 in 2019 before rising sharply to a peak of 11.26 in 2021, indicating an exceptionally high margin of safety. By 2022, the ratio adjusted to 7.96, which continues to represent a robust capacity to service fixed obligations compared to the 2018 baseline of 4.99.
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