Donaldson Company Inc (DCI)

The solvency ratios for Donaldson Company Inc. from July 31, 2021, to July 31, 2025, indicate a consistent pattern of zero debt levels across the key ratios. Specifically, the debt-to-assets ratio, debt-to-capital ratio, and debt-to-equity ratio are all reported as zero for each of these periods. This consistency suggests that the company has maintained an entirely equity-based capital structure without utilizing debt financing during this timeframe.

The financial leverage ratio, however, provides additional insight into the company's operational and financial structure. Over the period, the ratio fluctuated slightly, starting at 2.11 in 2021, increasing to 2.29 in 2022, then decreasing marginally to 2.10 in 2023, and further declining to 1.96 in 2024 before a slight uptick to 2.05 in 2025. These ratios suggest that, despite the absence of debt, the company demonstrates a significant degree of leverage relative to its equity. The pattern indicates that the company primarily relies on internal financing and retained earnings, and the leverage figure might be related to operational income comparisons or other non-debt-related financial metrics.

In summary, Donaldson Company Inc. displays a fiscal profile characterized by the absence of leverage derived from debt, with all debt ratios at zero. The variation in the financial leverage ratio points to operational or structural factors influencing its leverage measure, notwithstanding the lack of reported debt. This financial configuration implies a conservative capital structure with minimal or no reliance on external debt financing, thereby reducing financial risk associated with leverage.

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Coverage ratios

The interest coverage ratio for Donaldson Company Inc, as reflected in the provided data, indicates a generally strong capacity to meet interest obligations from operating earnings over the specified period. As of July 31, 2021, the ratio was 30.31, suggesting that the company's earnings before interest and taxes (EBIT) were more than thirty times its interest expense, reflecting a robust buffer and low risk of insolvency related to interest coverage.

This ratio maintained a high level in the subsequent year, showing a marginal increase to 30.42 by July 31, 2022. This stability demonstrates consistent operating performance and the company's capacity to service its interest without significant stress. However, a notable decline is observed in the year ending July 31, 2023, where the ratio decreased to 25.41. While still indicative of substantial coverage, the reduction suggests a slight erosion in earnings relative to interest obligations, possibly due to increased interest expenses or lower operating income.

Continuing this trend, the ratio increased modestly to 26.01 by July 31, 2024, recovering somewhat but remaining below the peak levels observed in 2021 and 2022. This fluctuation suggests stability with slight variations in operating income or interest expense, but no immediate concern regarding the company’s ability to meet interest payments.

By July 31, 2025, the ratio further declined to 21.34, reflecting a continued, albeit moderate, decrease in interest coverage. Although this figure is lower than previous years, it still indicates that earnings comfortably exceed interest obligations by a significant margin, thus maintaining an acceptable level of safety from an interest coverage standpoint.

Overall, the trend in Donaldson Company Inc.’s interest coverage ratio reveals a high initial margin of safety that has experienced some decline over the years but remains within a range that suggests a continued capacity to service interest expenses comfortably. The ratios indicate prudent level of earnings relative to interest expense, although ongoing monitoring is advisable should the trend of declining coverage persist.