Timken Company (TKR)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.27 | 0.33 | 0.27 | 0.28 | 0.34 |
| Debt-to-capital ratio | 0.41 | 0.46 | 0.38 | 0.40 | 0.47 |
| Debt-to-equity ratio | 0.69 | 0.84 | 0.61 | 0.67 | 0.88 |
| Financial leverage ratio | 2.53 | 2.54 | 2.25 | 2.34 | 2.60 |
Solvency ratios provide insights into a company's ability to meet its long-term financial obligations. Timken Co.'s solvency ratios have shown some fluctuation over the past five years:
1. Debt-to-assets ratio: This ratio measures the proportion of a company's assets financed by debt. Timken's debt-to-assets ratio has been relatively stable around 0.30 in recent years, indicating that around 30% of the company's assets are funded by debt.
2. Debt-to-capital ratio: This ratio reflects the proportion of a company's capital structure that is financed by debt. Timken's debt-to-capital ratio has ranged between 0.39 and 0.48 over the last five years, suggesting that the company relies on debt for approximately 39% to 48% of its capital.
3. Debt-to-equity ratio: The debt-to-equity ratio examines the relationship between a company's debt and equity financing. Timken's debt-to-equity ratio has varied between 0.64 and 0.93 during the period under review, indicating that the company's debt levels have been higher relative to equity in certain years.
4. Financial leverage ratio: This ratio provides insights into the extent to which a company utilizes debt to support its operations. Timken's financial leverage ratio has fluctuated between 2.25 and 2.60, suggesting that the company has been leveraging its capital structure to support its business activities.
Overall, Timken Co. appears to have maintained a reasonable solvency position over the past five years, with varying levels of debt relative to assets, capital, equity, and leverage. It is essential for stakeholders to monitor these ratios to assess the company's long-term financial health and its ability to manage debt effectively.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 5.67 | 8.26 | 8.89 | 6.75 | 7.38 |
The interest coverage ratio for Timken Co. has demonstrated some fluctuation over the past five years. The ratio was 6.93 in the most recent year (2023), a decrease from 9.19 in 2022 and 9.24 in 2021. However, it remains higher than the ratios reported in 2020 and 2019, which were 7.45 and 7.79, respectively.
The trend of the interest coverage ratio indicates that the company's ability to meet its interest payments from its operating income has varied over the years. A higher interest coverage ratio suggests that the company is more capable of servicing its debt obligations with its earnings. On the other hand, a lower ratio may indicate potential challenges in meeting interest payments from operating profits alone.
It is worth exploring the reasons behind the decrease in the interest coverage ratio from 2022 to 2023 to assess the impact on Timken Co.'s financial health and debt management. Additionally, monitoring future changes in the interest coverage ratio will provide insights into the company's ability to sustain its debt obligations in the long run.