Cummins Inc (CMI)
Solvency ratios
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | 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 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.21 | 0.23 | 0.23 | 0.20 | 0.20 | 0.22 | 0.23 | 0.23 | 0.24 | 0.26 | 0.17 | 0.17 | 0.19 | 0.19 | 0.19 | 0.19 | 0.21 | 0.21 | 0.21 | 0.18 |
| Debt-to-capital ratio | 0.39 | 0.42 | 0.43 | 0.42 | 0.42 | 0.39 | 0.41 | 0.43 | 0.45 | 0.48 | 0.32 | 0.32 | 0.35 | 0.35 | 0.35 | 0.35 | 0.37 | 0.37 | 0.37 | 0.34 |
| Debt-to-equity ratio | 0.65 | 0.72 | 0.74 | 0.72 | 0.72 | 0.65 | 0.70 | 0.77 | 0.82 | 0.91 | 0.47 | 0.48 | 0.55 | 0.53 | 0.55 | 0.53 | 0.58 | 0.59 | 0.59 | 0.52 |
| Financial leverage ratio | 3.07 | 3.11 | 3.28 | 3.51 | 3.62 | 3.01 | 3.07 | 3.27 | 3.38 | 3.55 | 2.80 | 2.86 | 2.91 | 2.85 | 2.87 | 2.83 | 2.81 | 2.80 | 2.82 | 2.84 |
Cummins Inc's solvency ratios provide insight into the company's ability to meet its long-term financial obligations.
The Debt-to-assets ratio remained relatively stable over the analyzed periods, ranging from 0.17 to 0.26. This indicates that Cummins Inc has maintained a conservative level of debt in relation to its total assets.
The Debt-to-capital ratio showed more variability, with a range from 0.32 to 0.48. This ratio indicates the proportion of the company's capital that is funded by debt, showing some fluctuations in the company's capital structure over time.
The Debt-to-equity ratio fluctuated between 0.47 and 0.91, suggesting significant changes in the proportion of debt and equity financing in Cummins Inc's capital structure. The higher values in 2022 and 2023 indicate a higher reliance on debt financing compared to equity.
The Financial leverage ratio, ranging from 2.80 to 3.62, reflects Cummins Inc's financial risk and the extent to which the company is using debt to finance its operations. The increase in this ratio over time indicates a higher level of financial leverage in the company's capital structure, potentially increasing its financial risk.
Overall, while Cummins Inc has maintained a relatively stable Debt-to-assets ratio indicating a conservative approach to debt, the fluctuations in the Debt-to-capital and Debt-to-equity ratios, along with the increasing Financial leverage ratio, suggest some changes in the company's capital structure and increased reliance on debt financing in recent years.
Coverage ratios
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | 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 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest coverage | 10.14 | 17.71 | 4.41 | 4.40 | 4.70 | 10.20 | 10.33 | 12.46 | 14.72 | 19.00 | 25.35 | 25.00 | 24.38 | 24.91 | 25.62 | 23.29 | 22.69 | 21.44 | 21.52 | 25.35 |
Cummins Inc's interest coverage ratio demonstrates the company's ability to meet its interest obligations with its operating income. The trend in the interest coverage ratio shows a generally strong performance from March 2020 to June 2021, with ratios consistently above 20, indicating a comfortable buffer between operating income and interest expenses. However, from September 2021 onwards, there was a noticeable decline in the interest coverage ratio, dropping to as low as 4.40 by March 2024.
This downward trend in the interest coverage ratio suggests that Cummins Inc may be facing challenges in generating sufficient operating income to cover its interest expenses. A declining interest coverage ratio could potentially signal financial distress, as the company's ability to meet its debt obligations through operating income is weakening.
It would be crucial for Cummins Inc to address the declining interest coverage ratio by improving profitability, reducing debt levels, or restructuring its debt obligations to ensure long-term financial stability and sustainability. Monitoring and managing this ratio will be essential for assessing the company's financial health and ability to service its debt obligations effectively.