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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- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Capital Asset Pricing Model (CAPM)
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Total Asset Turnover since 2005
- Analysis of Debt
- Aggregate Accruals
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Solvency Ratios (Summary)
Northrop Grumman Corp., solvency ratios (quarterly data)
Based on: 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 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).
- Debt to Equity Ratio
- The debt to equity ratio showed a general downward trend from March 2019 to March 2023, decreasing from 1.65 to 0.98. This suggests a gradual reduction in reliance on debt financing relative to equity, indicating improved financial stability. A slight uptick was observed at the end of the period, rising from 0.84 in December 2022 to 0.98 in March 2023.
- Debt to Equity Ratio Including Operating Lease Liability
- When including operating lease liabilities, the ratio remained consistently higher than the standard debt to equity ratio but followed a similar downward trend from 1.77 in March 2019 to 1.10 in March 2023. Moderate volatility is present, particularly towards the end, where the ratio rose from 0.96 to 1.10 between December 2022 and March 2023.
- Debt to Capital Ratio
- This ratio steadily declined over the period, moving from 0.62 to 0.50, reflecting a decrease in debt relative to the overall capital structure. This points to an ongoing effort to strengthen the equity base or reduce debt obligations historically. The declining trend supports an enhanced capital structure with moderate leverage.
- Debt to Capital Ratio Including Operating Lease Liability
- The adjusted ratio including operating lease liabilities followed a similar pattern, decreasing from 0.64 to 0.52. The consistent gap between the two ratios highlights the material impact of leasing obligations on overall debt levels.
- Debt to Assets Ratio
- The debt to assets ratio showed a reduction from 0.36 to 0.34, with some fluctuations. It generally indicates a moderate and slightly declining proportion of total assets financed through debt. This favors asset-backed financial stability but reveals limited variability throughout the years.
- Debt to Assets Ratio Including Operating Lease Liability
- This adjusted ratio was consistently higher, reducing from 0.39 to 0.38, confirming that lease liabilities somewhat increase leverage against assets. The ratio showed minor fluctuations but remained fairly stable, suggesting steady asset management relative to liabilities.
- Financial Leverage
- Financial leverage exhibited a significant downward trend from 4.55 in early 2019 to 2.92 by March 2023. This drop signals a substantial reduction in reliance on debt financing in relation to equity, reflecting a strengthened financial position and potentially reducing risk exposure from excessive borrowing.
- Interest Coverage Ratio
- The interest coverage ratio improved markedly, increasing from 7.78 to 12.33 over the period, peaking at 17.08 in December 2021. This metric’s upward trajectory implies enhanced ability to meet interest obligations from operating earnings, showing improved profitability and reduced financial risk.
Debt Ratios
Coverage Ratios
Debt to Equity
Northrop Grumman Corp., debt to equity calculation (quarterly data)
| Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | 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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Current portion of long-term debt | |||||||||||||||||||||||
| Long-term debt, net of current portion | |||||||||||||||||||||||
| Total debt | |||||||||||||||||||||||
| Shareholders’ equity | |||||||||||||||||||||||
| 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-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 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).
1 Q1 2023 Calculation
Debt to equity = Total debt ÷ Shareholders’ equity
= ÷ =
2 Click competitor name to see calculations.
The analysis of financial leverage metrics over the observed quarterly periods reveals notable shifts in the company's capital structure. Total debt exhibits fluctuations within a range, initially declining slightly from early 2019 to the end of that year, followed by a significant increase in the first half of 2020. Subsequently, a steady decrease in total debt is observed through most of 2021 and 2022, with a slight uptick occurring in early 2023.
Shareholders’ equity demonstrates a generally upward trajectory across the timeframe. There is a consistent increase from the first quarter of 2019 through the end of 2022, culminating in a significant rise in equity levels. However, a minor decline is noted in the first quarter of 2023.
The debt to equity ratio, a key indicator of financial leverage, shows a meaningful downward trend overall. Starting at a high point above 1.6 in early 2019, the ratio declines steadily, signaling reduced reliance on debt financing relative to equity. By the end of 2022, the ratio reaches its lowest point below 0.85, reflecting a stronger equity base in relation to debt obligations. In early 2023, the ratio experiences a modest increase but remains below 1.0, indicating a maintained balance favoring equity versus debt.
- Total Debt
- The company’s total debt peaked in early 2020, followed by progressive reductions through 2021 and 2022. This suggests active debt management, potentially aimed at lowering financial risk or realigning capital structure.
- Shareholders’ Equity
- Equity capital expanded steadily for most of the period, indicating either retained earnings accumulation, capital injections, or asset revaluations contributing to a stronger equity position.
- Debt to Equity Ratio
- The decreasing ratio indicates improved solvency and possibly a strategic shift toward financial stability by reducing leverage. The slight increase observed in the latest quarter may warrant monitoring to assess if leverage is being reintroduced.
Overall, the data portrays a company progressing towards lower financial leverage through deliberate debt reduction while building its equity base. Such a strategy supports enhanced financial resilience and a potentially lower cost of capital. The recent uptick in debt levels and leverage ratio in early 2023 requires consideration to understand the drivers and implications for ongoing capital management.
Debt to Equity (including Operating Lease Liability)
Northrop Grumman Corp., debt to equity (including operating lease liability) calculation (quarterly data)
| Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | 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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Current portion of long-term debt | |||||||||||||||||||||||
| Long-term debt, net of current portion | |||||||||||||||||||||||
| Total debt | |||||||||||||||||||||||
| Non-current operating lease liabilities | |||||||||||||||||||||||
| Total debt (including operating lease liability) | |||||||||||||||||||||||
| Shareholders’ equity | |||||||||||||||||||||||
| Solvency Ratio | |||||||||||||||||||||||
| Debt to equity (including operating lease liability)1 | |||||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | |||||||||||||||||||||||
| Eaton Corp. plc | |||||||||||||||||||||||
| RTX Corp. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 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).
1 Q1 2023 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Shareholders’ equity
= ÷ =
2 Click competitor name to see calculations.
The analysis of the financial data reveals notable trends in the company's leverage and equity position over the examined periods.
- Total debt (including operating lease liability)
- The total debt exhibited fluctuations over time. Initially, from March 2019 through December 2019, the debt remained relatively stable around the 15 billion US$ mark. From the first quarter of 2020, a significant increase in debt occurred, peaking near 17.4 billion US$ in mid-2020, likely indicative of increased financing activities or operational expenditures during that period. Subsequently, total debt decreased consistently throughout 2021 and into the end of 2022, reaching a low around 14.7 billion US$. However, in the first quarter of 2023, the debt rose again to approximately 16.6 billion US$, suggesting renewed borrowing or changes in lease liabilities.
- Shareholders’ equity
- Shareholders’ equity has generally trended upward across the timeframe. Starting from approximately 8.7 billion US$ in early 2019, equity showed a gradual increase, with some volatility early on. During 2020 and 2021, the equity increased steadily, crossing the 13 billion US$ level by mid-2022 and peaking at over 15.3 billion US$ by late 2022. There was a slight decline in the first quarter of 2023 to about 15.1 billion US$, but overall, the equity position strengthened markedly compared to the beginning of the period.
- Debt to equity ratio (including operating lease liability)
- The debt-to-equity ratio presents a declining trend from 2019 through 2022, which suggests an improvement in the financial structure and reduced leverage risk. Starting at a high of 1.77 in March 2019, the ratio decreased steadily, falling below 1.0 in the fourth quarter of 2022, reaching 0.96. This decline corresponds to the simultaneous reduction in total debt and increase in equity. However, in the first quarter of 2023, the ratio slightly increased to 1.1, reflecting the rise in total debt alongside a minor reduction in equity during the same period. Despite this slight uptick, the ratio remains considerably lower than in previous years, indicating a more conservative capital structure compared to the earlier figures in the dataset.
Debt to Capital
Northrop Grumman Corp., debt to capital calculation (quarterly data)
| Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Current portion of long-term debt | |||||||||||||||||||||||
| Long-term debt, net of current portion | |||||||||||||||||||||||
| Total debt | |||||||||||||||||||||||
| Shareholders’ equity | |||||||||||||||||||||||
| 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-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 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).
1 Q1 2023 Calculation
Debt to capital = Total debt ÷ Total capital
= ÷ =
2 Click competitor name to see calculations.
The financial data indicates that total debt experienced fluctuations over the observed periods. Initially, total debt was relatively stable around 14.3 billion USD through 2019, followed by a noticeable increase to approximately 16 billion USD in early to mid-2020. Subsequently, total debt declined steadily throughout 2021 and 2022, reaching a low point near 12.9 billion USD by the end of 2022. However, in the first quarter of 2023, total debt rose again to roughly 14.9 billion USD.
Total capital trends present an overall upward trajectory across the time frame. Starting at around 23.1 billion USD in early 2019, total capital steadily increased, with slight decelerations in late 2019 and 2020, before resuming growth through 2021 and 2022. By the first quarter of 2023, total capital had reached nearly 30 billion USD, marking a significant increase compared to the initial period.
Regarding leverage, the debt-to-capital ratio fluctuated but showed a notable decline from 0.62 in early 2019 to a low of approximately 0.46 during 2022, indicating a gradual reduction in reliance on debt financing relative to total capital. This decline suggests improved capitalization or an increase in equity or capital base over this period. However, the ratio rebounded slightly to 0.50 in the first quarter of 2023, coinciding with the increase in total debt observed during that period.
- Total Debt
- Maintained stability through 2019 around 14.3 billion USD, increased sharply to 16 billion USD in 2020, then declined steadily through 2021 and 2022 before rising again in early 2023.
- Total Capital
- Exhibited sustained growth over the entire period, increasing from approximately 23.1 billion USD in early 2019 to nearly 30 billion USD by early 2023.
- Debt to Capital Ratio
- Displayed a downward trend from 0.62 in 2019 to a low near 0.46 in 2022, reflecting decreased leverage, followed by a slight increase to 0.50 in early 2023.
Debt to Capital (including Operating Lease Liability)
Northrop Grumman Corp., debt to capital (including operating lease liability) calculation (quarterly data)
| Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | 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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Current portion of long-term debt | |||||||||||||||||||||||
| Long-term debt, net of current portion | |||||||||||||||||||||||
| Total debt | |||||||||||||||||||||||
| Non-current operating lease liabilities | |||||||||||||||||||||||
| Total debt (including operating lease liability) | |||||||||||||||||||||||
| Shareholders’ equity | |||||||||||||||||||||||
| Total capital (including operating lease liability) | |||||||||||||||||||||||
| Solvency Ratio | |||||||||||||||||||||||
| Debt to capital (including operating lease liability)1 | |||||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | |||||||||||||||||||||||
| Eaton Corp. plc | |||||||||||||||||||||||
| RTX Corp. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 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).
1 Q1 2023 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= ÷ =
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals notable trends in the company's debt and capital structure over the observed periods.
- Total Debt (Including Operating Lease Liability)
- The total debt level remained relatively stable throughout 2019, with values fluctuating slightly around the 15,000 million USD mark. However, entering 2020, there was a noticeable increase, peaking at approximately 17,395 million USD in the second quarter. Subsequently, debt began a declining trend through 2021 and most of 2022, reaching a lower level near 14,493 million USD in the second quarter of 2022. Toward late 2022 and early 2023, debt levels rose again, culminating at approximately 16,641 million USD by the first quarter of 2023.
- Total Capital (Including Operating Lease Liability)
- Total capital generally increased over the entire timeframe. From just over 24,000 million USD in early 2019, capital rose steadily, with some quarters showing significant increases. By late 2022, it reached approximately 30,013 million USD and continued to grow to around 31,777 million USD in the first quarter of 2023. This upward trend indicates consistent capital accumulation, potentially reflecting growth or investments.
- Debt to Capital Ratio (Including Operating Lease Liability)
- This ratio demonstrated a clear downward trajectory from above 0.6 in 2019 to below 0.5 during several quarters in 2022, signaling an improving capital structure with reduced leverage relative to capital. The ratio moved from a high of about 0.66 early in 2020 to a low near 0.49 in late 2022. However, it slightly increased again to approximately 0.52 by the first quarter of 2023, reflecting the recent increases in total debt relative to capital.
Overall, the company exhibited an initial increase in debt during early 2020, followed by a steady reduction in leverage through 2021 and most of 2022, alongside continual capital growth. The recent uptick in debt and a modest rise in the debt-to-capital ratio in early 2023 may warrant monitoring, but the prevailing trend over the period analyzed suggests improved financial stability and a stronger capital base.
Debt to Assets
Northrop Grumman Corp., debt to assets calculation (quarterly data)
| Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | 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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Current portion of long-term debt | |||||||||||||||||||||||
| Long-term debt, net of current portion | |||||||||||||||||||||||
| 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-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 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).
1 Q1 2023 Calculation
Debt to assets = Total debt ÷ Total assets
= ÷ =
2 Click competitor name to see calculations.
- Total Debt
- The total debt experienced fluctuations over the observed periods. Initially, debt remained relatively stable around 14,300 million USD from early 2019 until the end of 2019. In 2020, there was a notable increase reaching a peak around 16,000 million USD in the first three quarters, followed by a decline toward the year-end. During 2021 and 2022, the debt level remained fairly steady near 12,800 million USD, showing a reduction compared to the peak in 2020. However, in the first quarter of 2023, total debt rose sharply to approximately 14,852 million USD, reversing the prior downward trend.
- Total Assets
- Total assets generally increased over the analyzed timeframe, growing from around 39,700 million USD at the beginning of 2019 to a peak near 44,700 million USD by the end of 2020. After peaking, assets showed minor fluctuations but remained within the range of approximately 41,400 to 43,700 million USD throughout 2021 and 2022. By the first quarter of 2023, assets reached approximately 44,244 million USD, indicating a recovery and growth trend post the slight mid-period declines.
- Debt to Assets Ratio
- The debt to assets ratio exhibited a pattern reflecting the interplay between changes in total debt and total assets. Initially stable around 0.34 to 0.36 in 2019, the ratio increased modestly to around 0.37 in early to mid-2020, coinciding with the rise in total debt. Subsequently, the ratio declined gradually during 2021 and 2022 to levels near 0.29 to 0.31, as total debt decreased and assets remained relatively stable. In the first quarter of 2023, this ratio increased to approximately 0.34, indicating growing leverage driven by the recent rise in total debt relative to assets.
- Overall Insights
- The analysis reveals that the company’s leverage increased notably in 2020, likely reflecting external economic factors impacting its financing strategy. Following that period, efforts appear to have been made to reduce debt and maintain stable asset levels, resulting in lower leverage ratios during 2021 and 2022. The recent rise in total debt and corresponding increase in the debt to assets ratio in early 2023 suggests a potential shift in financing or investment activities, warranting further investigation into the underlying causes and implications for financial risk management.
Debt to Assets (including Operating Lease Liability)
Northrop Grumman Corp., debt to assets (including operating lease liability) calculation (quarterly data)
| Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | 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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Current portion of long-term debt | |||||||||||||||||||||||
| Long-term debt, net of current portion | |||||||||||||||||||||||
| Total debt | |||||||||||||||||||||||
| Non-current operating lease liabilities | |||||||||||||||||||||||
| Total debt (including operating lease liability) | |||||||||||||||||||||||
| Total assets | |||||||||||||||||||||||
| Solvency Ratio | |||||||||||||||||||||||
| Debt to assets (including operating lease liability)1 | |||||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | |||||||||||||||||||||||
| Eaton Corp. plc | |||||||||||||||||||||||
| RTX Corp. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 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).
1 Q1 2023 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= ÷ =
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals several important trends regarding the company's leverage and asset base over the observed periods.
- Total Debt (Including Operating Lease Liability)
- The total debt remained relatively stable around the range of $15.1 billion to $15.5 billion from early 2019 through the end of 2019. However, a notable increase occurred in early 2020, peaking around $17.4 billion during the first three quarters of 2020. Subsequently, the total debt exhibited a decreasing trend throughout 2021, declining to approximately $14.1 billion by the end of that year. A slight increase in debt was observed again through 2022, stabilizing around $14.5 billion. In the first quarter of 2023, total debt rose sharply to approximately $16.6 billion, indicating a significant uptick in leverage at the start of that year.
- Total Assets
- Total assets demonstrated a gradual increase from approximately $39.7 billion at the beginning of 2019 to a peak of about $44.8 billion in the latter part of 2020. Following this peak, assets saw a moderate decline during 2021, dropping to the low $41 billion range. During 2022 and into early 2023, total assets showed a consistent recovery trend, reaching around $44.2 billion by the first quarter of 2023. This overall increase suggests steady growth and asset accumulation despite short-term fluctuations.
- Debt to Assets Ratio (Including Operating Lease Liability)
- The debt to assets ratio started at about 0.39 in early 2019 and showed a slight decrease to around 0.37 by the end of that year, indicating modest deleveraging. In 2020, the ratio increased again, reaching roughly 0.40 during the middle of the year, reflecting the rise in debt levels relative to assets. Throughout 2021, this ratio declined steadily, bottoming near 0.33 by the third quarter before a small uptick to 0.34 at year-end, signaling a reduction in leverage relative to asset size. The ratio remained fairly consistent through 2022 but then increased to approximately 0.38 in the first quarter of 2023, influenced primarily by the rise in total debt. This signals a renewed increase in leverage relative to assets at the start of 2023.
Overall, the data indicates a cyclical pattern in the company's leverage, with a peak in debt levels and debt-to-asset ratio occurring in 2020, followed by a period of deleveraging in 2021. Asset values have generally trended upward, supporting the capacity to manage debt loads. However, the recent increase in debt observed in early 2023, alongside a corresponding rise in the leverage ratio, suggests a shift towards higher leverage, which may require monitoring in subsequent periods.
Financial Leverage
Northrop Grumman Corp., financial leverage calculation (quarterly data)
| Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |||||||
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| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Total assets | |||||||||||||||||||||||
| Shareholders’ equity | |||||||||||||||||||||||
| 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-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 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).
1 Q1 2023 Calculation
Financial leverage = Total assets ÷ Shareholders’ equity
= ÷ =
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals several notable trends in key balance sheet metrics over the examined periods.
- Total Assets
- Total assets demonstrated an overall growth trajectory from the beginning of the period to the most recent quarter. Starting at approximately 39.8 billion US dollars in early 2019, total assets increased to about 44.2 billion US dollars by the first quarter of 2023. Although there were minor fluctuations, the general pattern indicates steady asset accumulation with a peak around the end of 2020 before a slight dip and subsequent recovery. This suggests ongoing investments or expansion activities contributing to asset base growth.
- Shareholders’ Equity
- Shareholders’ equity showed a consistent upward trend throughout the period. Beginning near 8.7 billion US dollars in the first quarter of 2019, it rose steadily to over 15.1 billion US dollars by the first quarter of 2023. The increase is relatively smooth with incremental growth in nearly every quarter, particularly accelerating from 2021 onward. This pattern implies sustained value creation and possibly retained earnings or equity financing enhancing the company’s net worth over time.
- Financial Leverage (Ratio)
- The financial leverage ratio experienced a notable decline across the period. Initially high at around 4.55 times in early 2019, the ratio gradually decreased to approximately 2.92 times by the first quarter of 2023. The reduction appears steady, with the most pronounced drop occurring from late 2021 through early 2023. The lower financial leverage suggests a progressive reduction in reliance on debt financing relative to equity, indicating an improvement in the capital structure and potentially lower financial risk.
In summary, the company’s financial structure over the analyzed period reflects growth in total assets supported by increasing equity, alongside a strategic deleveraging trend. These developments point towards strengthening financial stability and enhanced shareholder value.
Interest Coverage
Northrop Grumman Corp., interest coverage calculation (quarterly data)
| Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | 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 | |||||||
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| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Net earnings | |||||||||||||||||||||||
| 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-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 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).
1 Q1 2023 Calculation
Interest coverage
= (EBITQ1 2023
+ EBITQ4 2022
+ EBITQ3 2022
+ EBITQ2 2022)
÷ (Interest expenseQ1 2023
+ Interest expenseQ4 2022
+ Interest expenseQ3 2022
+ Interest expenseQ2 2022)
= ( + + + )
÷ ( + + + )
=
2 Click competitor name to see calculations.
The financial data reveals several meaningful trends in the earnings before interest and tax (EBIT), interest expense, and interest coverage ratio over the observed periods.
- Earnings Before Interest and Tax (EBIT)
- The EBIT figures exhibit a generally volatile pattern throughout the observed quarters. For the initial periods in 2019, EBIT remained relatively stable, hovering slightly above 1,100 million US dollars. A notable exception occurred in the last quarter of 2019, where EBIT showed a significant negative value (-439 million), indicating a substantial loss during that quarter.
- Following this dip, EBIT rebounded strongly in 2020, with values ranging between approximately 1,178 million to 1,357 million US dollars in most quarters, except again in the final quarter of 2020, where EBIT declined to 465 million. A marked improvement was observed in 2021 and 2022 with EBIT exceeding the 1,200 million mark in most quarters and reaching highs of 3,478 million in December 2021 and 2,572 million in December 2022. However, the first quarter of 2023 saw a reduction to 1,127 million, indicating some volatility and a potential decline compared to preceding quarters.
- Interest Expense
- Interest expense remained relatively stable over the entire period, fluctuating moderately between 120 million and 160 million US dollars. There was no pronounced upward or downward trend, indicating consistent financing costs. The highest interest expenses were recorded in late 2019 and 2020, with a gradual decrease observed in 2022 and early 2023.
- Interest Coverage Ratio
- The interest coverage ratio demonstrated an improving trend overall, starting at around 7.78 in early 2019 and showing some fluctuations during the volatile EBIT period, notably decreasing to 5.83 in the last quarter of 2019. Post-2019, this ratio generally increased, peaking in the range of 17.08 in late 2021, which reflects stronger earnings relative to interest obligations.
- Subsequent quarters in 2022 showed slight declines but remained high relative to the initial periods, maintaining ratios above 12.3. The latest quarter in early 2023 reports a stable interest coverage ratio around 12.33, implying that despite the lower EBIT compared to the peak periods, the company still maintains a comfortable buffer to cover interest expenses.
In summary, the data points to an overall recovery and strengthening of operating earnings after a severe downturn at the end of 2019. The steady interest expenses combined with higher EBIT levels have led to improved interest coverage ratios, indicating enhanced financial stability and capacity to meet debt obligations over time. The sharp fluctuations at certain points warrant continued monitoring to assess sustainability of earnings growth.