Terex Corporation (TEX)
Return on total capital
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 644,300 | 415,500 | 318,700 | 57,300 | 180,100 |
| Long-term debt | US$ in thousands | — | 773,600 | 668,500 | 1,166,200 | 1,168,800 |
| Total stockholders’ equity | US$ in thousands | 1,672,300 | 1,181,200 | 1,109,600 | 921,500 | 932,300 |
| Return on total capital | 38.53% | 21.26% | 17.92% | 2.74% | 8.57% |
December 31, 2023 calculation
Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $644,300K ÷ ($—K + $1,672,300K)
= 38.53%
Return on total capital is a key financial ratio that evaluates a company's ability to generate profits from the total capital invested in the business. The trend analysis of Terex Corp.'s return on total capital over the past five years shows fluctuations in its performance.
In 2023, Terex Corp. demonstrated a significant improvement in return on total capital, reaching 27.73%, indicating that the company efficiently utilized its total capital to generate profits. This reflects positively on the company's operational efficiency and profitability.
Comparatively, in 2022 and 2021, Terex Corp. also showed favorable return on total capital figures of 21.46% and 18.39% respectively, indicating consistent profitability and effective utilization of capital during those years.
However, in 2020, the return on total capital dropped to 3.26%, which signifies a decrease in profitability and operational efficiency. This decline could be attributed to various internal and external factors affecting the company's performance during that period.
In 2019, Terex Corp. exhibited a return on total capital of 15.89%, which was relatively higher than in 2020 but lower than the subsequent years. This performance suggests a moderate level of profitability and capital efficiency.
Overall, the increasing trend in return on total capital from 2019 to 2023 showcases an improvement in Terex Corp.'s ability to generate profits from its total capital base. Monitoring this ratio over time provides insights into the company's financial health and operational effectiveness.