Timken Company (TKR)
Financial leverage ratio
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 6,541,700 | 5,772,400 | 5,170,700 | 5,041,600 | 4,859,900 |
| Total stockholders’ equity | US$ in thousands | 2,582,400 | 2,268,300 | 2,294,900 | 2,152,900 | 1,868,200 |
| Financial leverage ratio | 2.53 | 2.54 | 2.25 | 2.34 | 2.60 |
December 31, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $6,541,700K ÷ $2,582,400K
= 2.53
The financial leverage ratio of Timken Co. has exhibited fluctuations over the past five years. The ratio decreased from 2.60 in 2019 to 2.25 in 2021, indicating a reduction in the company's reliance on debt to finance its operations. However, the ratio increased to 2.54 in 2022 before slightly decreasing to 2.53 in 2023.
A financial leverage ratio above 1 indicates that a company relies more on debt than equity to fund its operations. Timken Co.'s ratios above 2 suggest a significant portion of its capital structure is comprised of debt. It is essential for investors and stakeholders to monitor the changes in this ratio over time, as high levels of financial leverage can increase the company's financial risk and impact its ability to meet its debt obligations.
Peer comparison
Dec 31, 2023