Caterpillar Inc (CAT)
Solvency ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 4.50 | 4.49 | 5.16 | 5.02 | 5.11 |
Based on the provided data, Caterpillar Inc's solvency ratios demonstrate a consistently strong financial position over the period from December 31, 2020, to December 31, 2024.
1. Debt-to-assets ratio: Caterpillar Inc's debt-to-assets ratio remains at 0.00 throughout the five-year period. This indicates that the company has not taken on significant debt relative to its total assets, signifying low financial risk and strong solvency.
2. Debt-to-capital ratio: Similarly, the debt-to-capital ratio also stands at 0.00 across all the years. This suggests that Caterpillar Inc has not relied heavily on borrowed capital to fund its operations, which is a positive sign for solvency and financial stability.
3. Debt-to-equity ratio: The debt-to-equity ratio stays at 0.00 for all the years evaluated. This implies that the company's reliance on debt financing compared to equity is negligible, further highlighting its robust financial position.
4. Financial leverage ratio: The financial leverage ratio, which measures the proportion of a company's assets that are financed with debt, shows a decreasing trend from 5.11 in 2020 to 4.50 in 2024. This decline indicates that Caterpillar Inc is effectively managing its leverage and becoming less reliant on debt to support its operations.
In conclusion, Caterpillar Inc's solvency ratios consistently demonstrate a sound financial position with minimal debt levels relative to its assets, capital, and equity. The decreasing financial leverage ratio further indicates prudent financial management and decreasing reliance on debt financing over the five-year period.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | 27.12 | 26.54 | 22.02 | 16.96 | 9.41 |
The interest coverage ratio for Caterpillar Inc has shown a positive trend over the years, indicating the company's ability to meet its interest payments from its operating income.
In December 31, 2020, the interest coverage ratio was 9.41, suggesting that the company generated operating income almost ten times greater than its interest expenses. This ratio improved significantly by December 31, 2021, reaching 16.96, and continued to strengthen in the following years. By December 31, 2024, the interest coverage ratio had reached 27.12, indicating a more than satisfactory ability to cover interest payments.
Overall, the increasing trend in the interest coverage ratio reflects Caterpillar's improving financial health and ability to comfortably meet its interest obligations with its operating earnings.