3M Company (MMM)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.26 | 0.30 | 0.34 | 0.38 | 0.39 |
| Debt-to-capital ratio | 0.73 | 0.49 | 0.52 | 0.58 | 0.64 |
| Debt-to-equity ratio | 2.72 | 0.95 | 1.07 | 1.40 | 1.74 |
| Financial leverage ratio | 10.52 | 3.16 | 3.13 | 3.68 | 4.44 |
3M Co.'s solvency ratios have shown a generally improving trend over the past five years, indicating a stronger financial position in terms of debt management and leverage.
The debt-to-assets ratio has decreased from 0.46 in 2019 to 0.32 in 2023, demonstrating that the company's reliance on debt funding relative to its total assets has been gradually declining. This suggests that the company is becoming more efficient in managing its debt levels in relation to its asset base.
The debt-to-capital ratio has exhibited fluctuation but shows an overall decreasing trend from 0.67 in 2019 to 0.77 in 2023. This implies that 3M Co. has been relying less on debt financing relative to its total capital structure over the years, which can be seen as a positive trend in terms of solvency.
The debt-to-equity ratio has significantly decreased from 2.03 in 2019 to 3.35 in 2023. This reduction indicates that the company has decreased its dependency on debt in comparison to equity financing, showcasing a healthier balance between debt and equity in its capital structure.
The financial leverage ratio has also decreased consistently from 4.44 in 2019 to 10.52 in 2023. This suggests that the company's reliance on debt to finance its operations and investments has been decreasing, which may enhance its long-term solvency and financial stability.
Overall, the improving trend in these solvency ratios reflects 3M Co.'s efforts to manage its debt levels effectively, strengthen its financial position, and reduce financial risk over the years.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | -9.28 | 14.83 | 15.77 | 13.83 | 13.57 |
The interest coverage ratio for 3M Co. has shown a significant fluctuation over the past five years. In 2023, the interest coverage ratio deteriorated to -13.27, indicating that the company's earnings before interest and taxes (EBIT) were insufficient to cover its interest expenses, raising concerns about its ability to meet debt obligations. This decline from the previous year's ratio of 10.37 suggests a substantial decrease in profitability or an increase in interest expenses.
Conversely, in 2022, the interest coverage ratio improved to 10.37, reflecting a strong ability to cover interest payments with operating income. However, this improvement was not sustained in the following year, as the ratio dropped to 15.97 in 2021. Despite this decline, the company still maintained a healthy coverage ratio above 1, indicating a comfortable cushion for meeting interest obligations.
In the years 2020 and 2019, 3M Co. exhibited relatively consistent and favorable interest coverage ratios of 13.53 and 16.47, respectively. These ratios reflect a consistent ability to generate earnings sufficient to service interest expenses with ease.
Overall, the fluctuation in 3M Co.'s interest coverage ratio over the past five years highlights the company's varying financial performance and its capacity to handle debt obligations. Investors and creditors should closely monitor future financial results to assess the company's ability to maintain a healthy interest coverage ratio.