Cummins Inc (CMI)
Financial leverage ratio
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 31,540,000 | 32,005,000 | 30,299,000 | 23,710,000 | 22,624,000 |
| Total stockholders’ equity | US$ in thousands | 10,271,000 | 8,850,000 | 8,975,000 | 8,146,000 | 8,062,000 |
| Financial leverage ratio | 3.07 | 3.62 | 3.38 | 2.91 | 2.81 |
December 31, 2024 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $31,540,000K ÷ $10,271,000K
= 3.07
The financial leverage ratio of Cummins Inc has shown a steady increase over the years, from 2.81 in December 31, 2020, to 3.07 in December 31, 2024. This indicates that the company's reliance on debt to finance its operations has been rising over the period. The peak in the financial leverage ratio was observed in December 31, 2023, at 3.62, suggesting a relatively higher level of debt compared to equity at that point in time.
It is important to note that while a higher financial leverage ratio may amplify returns on equity in favorable times, it also increases financial risk as higher debt levels can lead to financial strain during economic downturns or periods of high interest rates. Therefore, Cummins Inc's trend of increasing financial leverage ratio should be carefully monitored to assess the company's ability to manage its debt levels effectively and maintain financial stability.
Peer comparison
Dec 31, 2024