Caterpillar Inc (CAT)
Interest coverage
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 12,966,000 | 7,904,000 | 6,878,000 | 4,553,000 | 8,290,000 |
| Interest expense | US$ in thousands | 511,000 | 443,000 | 488,000 | 514,000 | 421,000 |
| Interest coverage | 25.37 | 17.84 | 14.09 | 8.86 | 19.69 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $12,966,000K ÷ $511,000K
= 25.37
Caterpillar Inc.'s interest coverage ratio has exhibited an increasing trend over the five-year period from 2019 to 2023, indicating the company's improved ability to meet its interest payment obligations from its earnings before interest and taxes (EBIT). The interest coverage ratio has risen from 19.76 in 2019 to 25.50 in 2023, implying that Caterpillar's EBIT was 25.50 times greater than its interest expenses in 2023.
This progressive improvement suggests that Caterpillar's earnings are sufficiently robust to cover its interest expenses comfortably, reflecting positively on the company's financial health and stability. The trend may indicate enhanced operational efficiency, effective cost management, and possibly a lower level of financial risk. Overall, the steady increase in the interest coverage ratio implies that Caterpillar Inc. is in a strong position to handle its interest obligations and is relatively less vulnerable to financial distress related to debt servicing.
Peer comparison
Dec 31, 2023