Illinois Tool Works Inc (ITW)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.41 | 0.40 | 0.43 | 0.50 | 0.51 |
| Debt-to-capital ratio | 0.68 | 0.67 | 0.66 | 0.71 | 0.72 |
| Debt-to-equity ratio | 2.10 | 2.00 | 1.91 | 2.44 | 2.56 |
| Financial leverage ratio | 5.15 | 4.99 | 4.44 | 4.91 | 4.98 |
Solvency ratios such as the debt-to-assets, debt-to-capital, debt-to-equity, and financial leverage ratios provide insights into Illinois Tool Works, Inc.'s ability to meet its long-term financial obligations and the extent to which the company relies on debt to finance its operations.
The debt-to-assets ratio has shown a slightly increasing trend over the five-year period, moving from 0.51 in 2019 to 0.53 in 2023. This suggests that the company's proportion of assets financed by debt has been gradually rising.
The debt-to-capital ratio, which measures the proportion of the company's capital structure represented by debt, has remained relatively stable between 0.68 and 0.73 over the same period. This indicates a consistent reliance on debt financing to support the company's operations.
The debt-to-equity ratio has shown fluctuations but generally increased from 2.12 in 2021 to 2.71 in 2023. This suggests that the company's debt levels in relation to equity have been trending upwards, indicating a higher degree of financial risk.
The financial leverage ratio, which reflects the company's overall financial risk by measuring the extent to which it relies on debt, has also shown variability but has generally increased from 4.44 in 2021 to 5.15 in 2023. This indicates a higher level of leverage and financial risk for the company as more assets are financed through debt.
In summary, the solvency ratios of Illinois Tool Works, Inc. demonstrate a trend of increasing reliance on debt financing over the past five years. This indicates a higher level of financial risk associated with the company's capital structure and highlights the importance of monitoring its ability to service its debt obligations in the long term.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 15.19 | 18.67 | 17.21 | 13.99 | 15.39 |
The interest coverage ratio of Illinois Tool Works, Inc. has shown a generally positive trend over the past five years. The ratio has remained comfortably above 1, indicating that the company has sufficient earnings to cover its interest payment obligations.
The interest coverage ratio was highest in 2022 at 20.94, suggesting a strong ability to meet interest payments with operating earnings. Although there was a slight decrease in 2023 to 18.79, the ratio remains at a healthy level, indicating continued financial stability.
Overall, the consistent and relatively high interest coverage ratios over the years reflect Illinois Tool Works, Inc.'s strong financial position and ability to service its debt obligations with ease. This stability may indicate lower financial risk and enhance investor confidence in the company's ability to manage its debt effectively.