Cummins Inc (CMI)
Financial leverage ratio
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 32,005,000 | 30,299,000 | 23,710,000 | 22,624,000 | 19,737,000 |
| Total stockholders’ equity | US$ in thousands | 8,850,000 | 8,975,000 | 8,146,000 | 8,062,000 | 7,507,000 |
| Financial leverage ratio | 3.62 | 3.38 | 2.91 | 2.81 | 2.63 |
December 31, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $32,005,000K ÷ $8,850,000K
= 3.62
The financial leverage ratio of Cummins Inc. has been showing an increasing trend over the past five years. In 2019, the ratio was at 2.63 and has since risen consistently each year, reaching 3.62 by the end of 2023. This indicates that the company is relying more on debt to finance its operations compared to its equity. Generally, a higher financial leverage ratio suggests higher financial risk as the company is more leveraged, which can magnify both gains and losses for shareholders. It is important for investors and stakeholders to closely monitor this ratio to ensure that the company's debt levels are sustainable and in line with its overall financial health.
Peer comparison
Dec 31, 2023