Cummins Inc (CMI)
Solvency ratios
| 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 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Debt-to-assets ratio | 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 | 0.14 | 0.15 | 0.13 | 0.14 |
| Debt-to-capital ratio | 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 | 0.26 | 0.28 | 0.23 | 0.26 |
| Debt-to-equity ratio | 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 | 0.36 | 0.39 | 0.31 | 0.34 |
| Financial leverage ratio | 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 | 2.63 | 2.61 | 2.45 | 2.54 |
Cummins Inc.'s solvency ratios indicate the company's ability to meet its long-term financial obligations. The debt-to-assets ratio has shown a declining trend over the past eight quarters, decreasing from 0.26 in Q4 2022 to 0.21 in Q4 2023. This suggests that the company has reduced its reliance on debt to finance its assets.
Similarly, the debt-to-capital and debt-to-equity ratios have also been decreasing, indicating that Cummins has been using less debt compared to equity and capital to fund its operations. The decreasing trend in these ratios is favorable as it signifies a lower financial risk for the company.
The financial leverage ratio, which indicates the extent to which the company is utilizing debt to finance its assets, has also shown a declining trend. This suggests that Cummins has been managing its capital structure more efficiently in recent quarters, reducing its financial leverage.
Overall, the downward trends in the solvency ratios of Cummins Inc. highlight an improvement in the company's financial health and stability. This indicates that Cummins is gradually reducing its reliance on debt and strengthening its financial position to meet its long-term obligations.
Coverage ratios
| 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 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest coverage | 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 | 24.77 | 25.86 | 25.86 | 25.04 |
Cummins Inc.'s interest coverage ratio has shown a downward trend over the past quarters, indicating a decrease in its ability to cover interest expenses with its earnings before interest and taxes (EBIT). The company's interest coverage ratio ranged from a high of 36.53 in Q2 2022 to a low of 13.28 in Q3 2023.
The notable decline in the interest coverage ratio from Q2 2022 to Q3 2023 may raise concerns about Cummins Inc.'s ability to meet its interest payments out of its operating income. However, it is important to note that despite the decrease, the company's interest coverage ratio remains comfortably above 1, which suggests that it is still generating sufficient operating income to cover its interest expenses.
Overall, while the declining trend in interest coverage is worth monitoring, the current levels indicate that Cummins Inc. is managing its interest obligations effectively. Investors and creditors should continue to assess the company's financial health and performance in the context of its industry and market conditions.