Cummins Inc (CMI)
Debt-to-capital ratio
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Long-term debt | US$ in thousands | 6,375,000 | 7,400,000 | 4,461,000 | 4,665,000 | 2,706,000 |
| Total stockholders’ equity | US$ in thousands | 8,850,000 | 8,975,000 | 8,146,000 | 8,062,000 | 7,507,000 |
| Debt-to-capital ratio | 0.42 | 0.45 | 0.35 | 0.37 | 0.26 |
December 31, 2023 calculation
Debt-to-capital ratio = Long-term debt ÷ (Long-term debt + Total stockholders’ equity)
= $6,375,000K ÷ ($6,375,000K + $8,850,000K)
= 0.42
The debt-to-capital ratio of Cummins Inc. has shown some fluctuation over the past five years.
In 2019 and 2020, the company had a relatively low debt-to-capital ratio of 0.24 and 0.34, respectively, indicating that Cummins relied more on equity financing rather than debt to fund its operations and investments during those years.
However, the ratio increased to 0.33 in 2021, suggesting a slight rise in the proportion of debt in Cummins' capital structure. This could indicate that the company may have taken on additional debt to finance growth opportunities or other strategic initiatives.
In 2022, the debt-to-capital ratio further increased to 0.47, reflecting a higher reliance on debt compared to the previous year. This significant rise could signal a shift in the company's financing strategy towards leveraging more debt.
By the end of 2023, the ratio decreased slightly to 0.43, but still remained higher than the levels seen in 2019 and 2020. This indicates that Cummins continues to maintain a moderate level of debt in its capital structure, which may be a deliberate choice to take advantage of favorable interest rates or to support its growth objectives.
Overall, the trend in Cummins Inc.'s debt-to-capital ratio suggests a strategic balance between debt and equity financing over the years, with the company potentially adjusting its capital structure in response to changing business conditions and opportunities.
Peer comparison
Dec 31, 2023