3M Company (MMM)
Solvency ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.28 | 0.26 | 0.30 | 0.34 | 0.38 |
| Debt-to-capital ratio | 0.74 | 0.73 | 0.49 | 0.52 | 0.58 |
| Debt-to-equity ratio | 2.90 | 2.72 | 0.95 | 1.07 | 1.40 |
| Financial leverage ratio | 10.38 | 10.52 | 3.16 | 3.13 | 3.68 |
The solvency ratios of 3M Company have shown some fluctuations over the years. The debt-to-assets ratio has decreased from 0.38 in 2020 to 0.28 in 2024, indicating that the company has reduced its reliance on debt to finance its assets.
Similarly, the debt-to-capital ratio decreased from 0.58 in 2020 to 0.74 in 2024, reflecting a decrease in the proportion of debt in the company's capital structure.
Conversely, the debt-to-equity ratio decreased from 1.40 in 2020 to 2.90 in 2024, suggesting that the company has taken on more debt relative to its equity.
The financial leverage ratio has shown a significant increase from 3.68 in 2020 to 10.38 in 2024, indicating a substantial increase in the company's financial leverage, which may pose higher financial risk.
Overall, while the debt-to-assets and debt-to-capital ratios improved, the increase in the debt-to-equity ratio and financial leverage ratio raises concerns about the company's increased reliance on debt to finance its operations.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | 10.22 | -9.28 | 14.83 | 15.77 | 13.83 |
The interest coverage ratio for 3M Company has shown a generally positive trend over the past five years. In December 2020, the interest coverage ratio was 13.83, indicating that the company was able to cover its interest expenses nearly 14 times with its operating income. This ratio improved in the following years, reaching 15.77 in December 2021 and 14.83 in December 2022, demonstrating the company's strengthening ability to meet its interest obligations.
However, there was a significant decline in the interest coverage ratio to -9.28 in December 2023. This negative ratio suggests that 3M Company's operating income was not sufficient to cover its interest expenses during that period, which may raise concerns about the company's financial health and ability to service its debt. Notably, an interest coverage ratio below 1 indicates that a company is not generating enough operating income to meet its interest payments.
In December 2024, the interest coverage ratio improved to 10.22, although it remained below the levels seen in the earlier years. This improvement is a positive sign, but it is essential for the company to continue monitoring and managing its financial performance to ensure it can consistently cover its interest expenses and maintain financial stability.