Cummins Inc (CMI)
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 | 1,761,000 | 2,929,000 | 2,706,000 | 2,269,000 | 2,700,000 |
| Interest expense | US$ in thousands | 375,000 | 199,000 | 111,000 | 100,000 | 109,000 |
| Interest coverage | 4.70 | 14.72 | 24.38 | 22.69 | 24.77 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $1,761,000K ÷ $375,000K
= 4.70
Cummins Inc.'s interest coverage ratio shows a declining trend over the past five years. The interest coverage ratio measures the company's ability to cover its interest expenses with operating income. A higher ratio indicates that the company is more capable of meeting its interest payment obligations.
In 2023, the interest coverage ratio stands at 13.55, down from 20.23 in 2022 and significantly lower than the ratios of 31.63 in 2021, 29.10 in 2020, and 45.13 in 2019. This decline may raise concerns about Cummins Inc.'s ability to comfortably cover its interest expenses using its operating income.
It is essential for investors and stakeholders to closely monitor this trend and understand the reasons behind the decreasing interest coverage ratio to assess the company's financial health and sustainability. Factors such as changes in revenue, cost structure, and debt levels could impact the interest coverage ratio and provide insights into Cummins Inc.'s overall financial performance and risk levels.
Peer comparison
Dec 31, 2023