McKesson Corp. (NYSE:MCK)

The financial ratios over the six-year period ending March 31, 2016, demonstrate notable shifts in the company's leverage and coverage capacities.

Debt to Equity

The debt to equity ratio initially increased from 0.55 in 2011 to a peak of 1.26 in 2014, indicating a rise in leverage relative to shareholders’ equity during this period. Following 2014, the ratio declines to 0.91 by 2016, suggesting a reduction in reliance on debt financing relative to equity.

Debt to Capital

This ratio follows a similar pattern, increasing steadily from 0.36 in 2011 to 0.56 in 2014, and then decreasing to 0.48 in 2016. The trend reflects a higher proportion of debt in the company’s capital structure reaching its maximum around 2014 before improving in subsequent years.

Debt to Assets

The debt to assets ratio remained relatively low throughout the period but increased from 0.13 in 2011 to 0.21 in 2014, before declining back to 0.14 in 2016. This indicates a temporary increase in leverage against total assets during the middle years, followed by a return to a more conservative asset financing structure.

Financial Leverage

Financial leverage shows a consistent upward trend from 4.28 in 2011 to 6.73 in 2015, indicating increasing use of debt or other liabilities relative to equity. There is a slight improvement in 2016, with the ratio decreasing to 6.34, although it remains elevated compared to earlier years.

Interest Coverage

Interest coverage fluctuates moderately, moving from 8.36 in 2011 to a low of 7.92 in 2014, then rising substantially to 10.21 in 2016. The increase towards the end of the period suggests improved ability to meet interest obligations from operating earnings.

Fixed Charge Coverage

Fixed charge coverage demonstrates some volatility, declining from 5.31 in 2011 to 4.26 in 2015, indicating a decreasing buffer to cover fixed charges. The ratio recovers to 5.13 in 2016, implying a strengthening in capacity to meet fixed financial commitments.

Overall, the data reflect a phase of increasing leverage up to 2014-2015, accompanied by some pressure on coverage ratios. Improved interest and fixed charge coverage ratios in 2016 suggest enhanced earnings strength or reduced fixed obligations, contributing to a more stable financial position. The reduction in leverage ratios after 2014 indicates proactive steps to manage debt levels relative to equity and assets.

Total debt

Total debt demonstrated a notable upward trend from 2011 to 2014, more than doubling from approximately 4,004 million US dollars to 10,719 million US dollars. Following this peak in 2014, total debt decreased steadily over the next two years to 8,154 million US dollars by 2016.

Total McKesson Corporation stockholders’ equity

Stockholders’ equity showed a generally positive trajectory despite some fluctuations. It started at 7,220 million US dollars in 2011, dipping to a low of 6,831 million US dollars in 2012, then recovering and increasing steadily to 8,924 million US dollars by 2016. The highest value was recorded in 2016, indicating a strengthening equity base at that point.

Debt to equity ratio

The debt to equity ratio increased significantly between 2011 and 2014, moving from 0.55 to a peak of 1.26. This indicates that debt levels grew disproportionately relative to equity during this period. After 2014, the ratio declined, dropping to 0.91 by 2016, suggesting a rebalancing toward less leverage relative to equity.

Overall analysis

The period from 2011 to 2014 was marked by aggressive debt accumulation, which led to a peak in leverage as shown by the high debt-to-equity ratio. Concomitantly, stockholders' equity, while initially declining in 2012, ultimately recovered by 2014 but did not keep pace with the rapid debt increase. From 2014 onward, the company appears to have prioritized reducing debt and strengthening its equity, resulting in a more balanced capital structure by 2016. This shift could imply efforts to improve financial stability or respond to changing market or operational conditions.

Total Debt

The total debt experienced an overall increase from 2011 through 2014, rising from $4,004 million to a peak of $10,719 million. After reaching this peak, debt decreased notably in the subsequent years, reducing to $9,844 million in 2015 and further to $8,154 million in 2016. This pattern suggests a period of significant borrowing or acquisition financing culminating in 2014, followed by a concerted effort to reduce leverage over the next two years.

Total Capital

Total capital showed a steady increase from 2011 to 2014, moving from $11,224 million to $19,241 million. Post-2014, total capital slightly declined but remained substantially higher than the early period, with values of $17,845 million in 2015 and $17,078 million in 2016. This trajectory indicates growth in the overall financing base until 2014, followed by stabilization or modest contraction thereafter.

Debt to Capital Ratio

The ratio of debt to total capital increased from 0.36 in 2011 to a maximum of 0.56 in 2014, reflecting an increasing reliance on debt financing relative to total capital. Following this peak, the ratio decreased to 0.55 in 2015 and further to 0.48 in 2016, demonstrating a deleveraging trend and a shift towards a more balanced or equity-inclined capital structure. Overall, the data show a rise in financial leverage through 2014, with a subsequent reduction in leverage in the following years.

Total Debt

The total debt exhibits a relatively stable level from 2011 to 2012, with values around 4,000 million US dollars. Thereafter, there is a notable increase in 2013, reaching 4,873 million, followed by a significant surge to 10,719 million in 2014. Subsequently, total debt declines in the two following years, decreasing to 9,844 million in 2015 and further down to 8,154 million in 2016.

Total Assets

Total assets show a consistent upward trend throughout the period. From 2011 to 2013, the growth is steady, rising from 30,886 million to 34,786 million. A marked acceleration occurs in 2014, with total assets increasing substantially to 51,759 million. The asset base continues to expand in 2015 and 2016, reaching 53,870 million and 56,563 million, respectively.

Debt to Assets Ratio

The debt to assets ratio remains relatively low and stable at around 0.12 to 0.14 through 2011 to 2013. In 2014, the ratio rises sharply to 0.21, reflecting the rapid increase in debt relative to assets. Subsequently, this ratio declines to 0.18 in 2015 and further to 0.14 in 2016, indicating a reduction in leverage and improved asset coverage of debt.

Total assets

The total assets showed a consistent upward trend over the six-year period. Starting at 30,886 million USD in 2011, the figure increased moderately to 34,786 million USD by 2013. From 2013 to 2014, there was a sharp rise to 51,759 million USD, followed by continued growth to 53,870 million USD in 2015 and 56,563 million USD in 2016, indicating significant asset expansion during these years.

Total McKesson Corporation stockholders’ equity

Stockholders’ equity exhibited some fluctuation during the timeframe. It decreased slightly from 7,220 million USD in 2011 to 6,831 million USD in 2012, then increased to 7,070 million USD in 2013. There was a more notable rise to 8,522 million USD in 2014, before declining to 8,001 million USD in 2015. The equity rose again to 8,924 million USD in 2016. Overall, equity showed moderate growth with some variability.

Financial leverage

The financial leverage ratio increased steadily from 4.28 in 2011 to 4.92 in 2013, showing a gradual rise in the use of debt relative to equity. The ratio jumped sharply to 6.07 in 2014 and continued to rise to 6.73 in 2015 before slightly declining to 6.34 in 2016. This indicates a marked increase in leverage over the period, reflecting a higher reliance on debt financing particularly after 2013.

Earnings Before Interest and Tax (EBIT)

There is a clear upward trend in EBIT over the six-year period. Starting at 1,857 million US dollars in 2011, EBIT increased steadily each year, reaching 3,603 million US dollars by 2016. The growth indicates improving operating profitability, with a notable acceleration in the latter years, particularly between 2014 and 2016.

Interest Expense

Interest expense showed a moderate increasing trend initially, rising from 222 million US dollars in 2011 to a peak of 374 million US dollars in 2015. In 2016, however, there is a slight reduction to 353 million US dollars, suggesting some improvement or reduction in borrowing costs or debt levels.

Interest Coverage Ratio

The interest coverage ratio, which measures the ability to cover interest expenses with earnings, remained relatively stable with minor fluctuations from 2011 to 2015, ranging between 7.92 and 9.00. In 2016, the ratio improved significantly to 10.21, reflecting stronger earnings relative to interest expenses and an enhanced capacity to service debt obligations.

Earnings before fixed charges and tax

The earnings before fixed charges and tax exhibited an overall upward trajectory from 2011 to 2016. Starting at 2014 million US dollars in 2011, the value increased to 4036 million US dollars by 2016, almost doubling over the six-year period. Notably, the most significant annual increase occurred between 2014 and 2015, indicating strong growth during that interval.

Fixed charges

Fixed charges rose from 379 million US dollars in 2011 to 786 million US dollars in 2016. The increase was consistent across the years, with some fluctuations, such as a peak at 814 million US dollars in 2015 followed by a slight decline in 2016. Overall, fixed charges more than doubled over the period but showed a moderated growth rate in the final year.

Fixed charge coverage ratio

The fixed charge coverage ratio displayed some variability, beginning at 5.31 in 2011 and decreasing to its lowest point of 4.26 in 2015 before recovering to 5.13 in 2016. This indicates that although earnings before fixed charges and tax generally increased, the rate of increase in fixed charges affected coverage negatively until 2015, after which improvement was observed. The ratio remaining above 4 throughout the period suggests a consistent ability to cover fixed charges despite the fluctuations.

Summary

The data indicate a positive trend in earnings before fixed charges and tax, reflecting strong operational performance. Fixed charges similarly increased, which is typical as operations scale. The coverage ratio, while showing some decline until 2015, improved thereafter, signaling enhanced financial robustness or more favorable management of fixed obligations. Overall, the financial indicators reflect growth with manageable fixed charge risk over the six-year horizon.