BorgWarner Inc (BWA)

The solvency ratios of BorgWarner Inc indicate the company's ability to meet its long-term financial obligations and manage its debt levels over time.

1. Debt-to-assets ratio: This ratio shows the proportion of the company's assets financed by debt. BorgWarner's debt-to-assets ratio has been relatively stable, ranging from 0.23 to 0.27 over the years. This indicates that around 23% to 27% of the company's assets are funded by debt.

2. Debt-to-capital ratio: The debt-to-capital ratio reflects the company's financial leverage and risk. BorgWarner's debt-to-capital ratio has increased slightly from 0.37 in 2020 to 0.40 in 2024. This suggests that the company has been relying more on debt to finance its operations compared to its capital.

3. Debt-to-equity ratio: This ratio shows the extent to which the company's operations are funded by debt compared to equity. BorgWarner's debt-to-equity ratio has been on an upward trend, increasing from 0.58 in 2020 to 0.68 in 2024. This indicates a higher level of debt relative to equity in the company's capital structure.

4. Financial leverage ratio: The financial leverage ratio measures the company's ability to meet its financial obligations. BorgWarner's financial leverage ratio has fluctuated over the years, ranging from 2.35 to 2.53. This suggests that the company has been managing its debt levels and financial risks effectively.

Overall, BorgWarner Inc's solvency ratios reflect a stable financial position with a moderate level of debt relative to assets, capital, and equity. However, the increasing trend in the debt-to-equity ratio indicates a higher reliance on debt financing, which may warrant further monitoring to ensure long-term financial sustainability.

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Coverage ratios

The interest coverage ratio for BorgWarner Inc has shown fluctuations over the past five years. As of December 31, 2020, the interest coverage ratio was robust at 77.25, indicating the company had a strong ability to meet its interest obligations. However, this ratio declined significantly to 9.84 by the end of December 31, 2021, which suggests a potential strain on the company's ability to cover its interest expenses.

The ratio improved slightly to 14.31 by December 31, 2022, indicating a better capacity to handle interest payments compared to the previous year. However, by December 31, 2023, the interest coverage ratio decreased to 12.89, signaling a continued but moderate decline in the company's ability to cover its interest costs.

The most recent data available as of December 31, 2024, shows a further decrease in the interest coverage ratio to 5.52, reflecting a significant deterioration in BorgWarner Inc's ability to meet its interest obligations out of its operating income. This trend indicates a heightened risk of financial distress or potential challenges in servicing its debt in the future.