Caterpillar Inc (CAT)
Solvency ratios
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | 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 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.28 | 0.00 | 0.00 | 0.00 | 0.31 | 0.00 | 0.00 | 0.00 | 0.31 | 0.00 | 0.00 | 0.00 | 0.33 | 0.00 | 0.00 | 0.00 | 0.33 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.56 | 0.00 | 0.00 | 0.00 | 0.62 | 0.00 | 0.00 | 0.00 | 0.61 | 0.00 | 0.00 | 0.00 | 0.63 | 0.00 | 0.00 | 0.00 | 0.64 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 1.25 | 0.00 | 0.00 | 0.00 | 1.62 | 0.00 | 0.00 | 0.00 | 1.58 | 0.00 | 0.00 | 0.00 | 1.69 | 0.00 | 0.00 | 0.00 | 1.80 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 4.49 | 4.23 | 4.68 | 4.60 | 5.16 | 5.18 | 5.15 | 4.81 | 5.01 | 4.84 | 4.84 | 4.86 | 5.09 | 5.12 | 5.56 | 5.33 | 5.36 | 5.20 | 5.32 | 5.09 |
The solvency ratios of Caterpillar Inc. provide insights into the company's ability to meet its long-term financial obligations.
Debt-to-assets ratio: This ratio measures the proportion of the company's assets that are financed by debt. The trend for Caterpillar Inc. shows that the ratio has been relatively stable around 0.43 to 0.44 in the recent quarters, indicating that about 43% to 44% of the company's assets are funded by debt.
Debt-to-capital ratio: This ratio indicates the percentage of the company's capital structure that is comprised of debt. Caterpillar Inc. has shown a slight increase in its debt-to-capital ratio from Q1 2023 to Q4 2023, ranging from 0.64 to 0.66. This suggests that debt forms around 66% of the company's total capital by the end of Q4 2023.
Debt-to-equity ratio: This ratio reflects the leverage of the company and measures the extent to which debt is used to finance operations relative to equity. Caterpillar Inc.'s debt-to-equity ratio has fluctuated throughout the quarters, indicating varying levels of financial leverage. However, the ratio remains elevated, ranging between 1.81 to 2.33 during the period, implying that the company relies significantly on debt financing compared to equity.
Financial leverage ratio: This ratio provides a broader view of the company's leverage by considering all forms of liabilities in relation to equity. Caterpillar Inc.'s financial leverage ratio has also exhibited fluctuations, but it has generally been high, surpassing 4 in all quarters. This indicates that the company has a higher proportion of debt and other liabilities relative to equity, highlighting potential financial risks.
Overall, the analysis of Caterpillar Inc.'s solvency ratios suggests that the company maintains a considerable level of debt and financial leverage, which may warrant close monitoring of its ability to service its debt obligations in the long term.
Coverage ratios
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | 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 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest coverage | 25.37 | 22.93 | 21.76 | 18.96 | 17.84 | 17.89 | 15.97 | 15.21 | 14.09 | 13.14 | 11.30 | 9.14 | 8.86 | 10.13 | 13.08 | 17.37 | 19.69 | 20.40 | 20.73 | 20.67 |
Interest coverage is a key financial ratio that indicates a company's ability to meet its interest obligations from its operating income. In the case of Caterpillar Inc., the interest coverage ratio has been steadily improving over the past eight quarters, from 15.27 in Q1 2022 to 25.50 in Q4 2023. This trend suggests that Caterpillar's earnings before interest and taxes (EBIT) have been consistently sufficient to cover its interest expenses, with a significant buffer to handle fluctuations in operating performance.
The gradual increase in interest coverage reflects Caterpillar's strengthening financial position and operational efficiency. A higher interest coverage ratio not only signals the company's ability to service its debt obligations but also indicates a lower financial risk and greater financial stability. The consistent improvement in Caterpillar's interest coverage ratio is a positive indicator for investors and creditors, highlighting the company's sound financial health and capacity to manage its debt responsibly.
Overall, the upward trajectory of Caterpillar's interest coverage ratio signifies a positive trend in the company's financial performance and suggests a healthy balance between earnings and interest expenses.