Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Monsanto Co., solvency ratios
Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).
- Debt to equity ratio
- The debt to equity ratio remained low and stable around 0.17 to 0.18 during 2012 and 2013. It surged significantly to 0.99 in 2014, followed by a further rise to 1.29 in 2015 and a peak at 1.99 in 2016, before decreasing to 1.26 in 2017. This indicates a substantial increase in the company's reliance on debt financing relative to equity over the period, particularly between 2013 and 2016, with some reduction in leverage in the last year.
- Debt to capital ratio
- The debt to capital ratio followed a similar trend to debt to equity, staying around 0.14-0.15 in the first two years, then sharply rising to 0.50 in 2014 and increasing further to 0.56 in 2015, peaking at 0.67 in 2016. It decreased back to 0.56 in 2017, reflecting the company's increasing proportion of debt in its capital structure through 2016, followed by a partial deleveraging.
- Debt to assets ratio
- This ratio was stable at 0.10 in 2012 and 2013, then grew notably to 0.35 in 2014, 0.41 in 2015, and 0.46 in 2016, before declining to 0.38 in 2017. The trend suggests increasing debt levels relative to total assets, peaking in 2016 similarly to other leverage ratios, with a slight improvement thereafter.
- Financial leverage ratio
- Financial leverage increased steadily from 1.65 in 2013 to 2.79 in 2014, then to 3.14 in 2015, reaching a high of 4.35 in 2016 before reducing to 3.31 in 2017. The rising leverage indicates a greater use of debt relative to shareholder equity to finance company assets over the period, with a notable spike in 2016.
- Interest coverage ratio
- Interest coverage was highest at 20.94 in 2013, declined to 16.43 in 2014, and fell sharply to 8.3 in 2015. The ratio further dropped to a low of 5.57 in 2016, improving modestly to 7.38 in 2017. This decline shows a reduced ability to cover interest expenses with operating earnings, particularly during 2015-2016, coinciding with increased debt levels.
- Fixed charge coverage ratio
- The fixed charge coverage ratio exhibited a downward trend from 8.96 in 2013 to 8.36 in 2014, then decreased further to 5.48 in 2015 and 3.88 in 2016, with some recovery to 5.04 in 2017. This indicates mounting difficulty in covering fixed financial obligations during 2015-2016, partly reversing in the final year.
Debt Ratios
Coverage Ratios
Debt to Equity
Monsanto Co., debt to equity calculation, comparison to benchmarks
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Short-term debt, including current portion of long-term debt | 870) | 1,587) | 615) | 233) | 51) | 36) | |
| Long-term debt, excluding current portion | 7,254) | 7,453) | 8,429) | 7,528) | 2,061) | 2,038) | |
| Total debt | 8,124) | 9,040) | 9,044) | 7,761) | 2,112) | 2,074) | |
| Total Monsanto Company shareowners’ equity | 6,438) | 4,534) | 6,990) | 7,875) | 12,559) | 11,833) | |
| Solvency Ratio | |||||||
| Debt to equity1 | 1.26 | 1.99 | 1.29 | 0.99 | 0.17 | 0.18 | |
| Benchmarks | |||||||
| Debt to Equity, Competitors2 | |||||||
| lululemon athletica inc. | — | — | — | — | — | — | |
| Nike Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).
1 2017 Calculation
Debt to equity = Total debt ÷ Total Monsanto Company shareowners’ equity
= 8,124 ÷ 6,438 = 1.26
2 Click competitor name to see calculations.
The financial data reveals significant changes in the company's debt levels, equity, and leverage ratios over the examined six-year period.
- Total Debt
- The total debt demonstrated a moderate increase from 2012 to 2013, rising slightly from 2,074 million USD to 2,112 million USD. However, there was a substantial surge in 2014, with total debt increasing sharply to 7,761 million USD. The upward trend continued into 2015, reaching 9,044 million USD, and remained nearly stable in 2016 at 9,040 million USD before decreasing to 8,124 million USD in 2017. Overall, total debt has increased noticeably compared to the beginning of the period.
- Total Shareowners’ Equity
- Equity figures exhibit a contrasting pattern compared to debt. Between 2012 and 2013, equity rose from 11,833 million USD to 12,559 million USD, indicating growth. However, equity declined significantly in 2014 to 7,875 million USD and continued decreasing through 2015 and 2016, hitting a low of 4,534 million USD in 2016. In 2017, a moderate recovery is observed with equity increasing to 6,438 million USD. Overall, equity shows a downward trend with some recovery toward the end of the period.
- Debt to Equity Ratio
- The debt to equity ratio remained relatively low and stable in 2012 and 2013 at about 0.18 and 0.17, respectively, reflecting a conservative capital structure. From 2014 onwards, a marked increase is apparent, with the ratio reaching 0.99 in 2014, crossing the threshold of 1.0 in 2015 at 1.29, and peaking in 2016 at 1.99. By 2017, the ratio declined to 1.26, indicating some deleveraging but maintaining a higher leverage level than at the period’s start. This pattern suggests increased reliance on debt financing relative to equity during the middle years, followed by partial deleveraging.
In summary, the company experienced significant increases in debt starting in 2014, coupled with declining equity values, which resulted in a substantially higher leverage ratio for several years. A partial reversal of these trends was noted in the final year, reflecting efforts to reduce leverage and bolster equity. These changes in capital structure may imply strategic shifts in financing, possible acquisitions, or other corporate actions impacting financial risk and resource allocation.
Debt to Capital
Monsanto Co., debt to capital calculation, comparison to benchmarks
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Short-term debt, including current portion of long-term debt | 870) | 1,587) | 615) | 233) | 51) | 36) | |
| Long-term debt, excluding current portion | 7,254) | 7,453) | 8,429) | 7,528) | 2,061) | 2,038) | |
| Total debt | 8,124) | 9,040) | 9,044) | 7,761) | 2,112) | 2,074) | |
| Total Monsanto Company shareowners’ equity | 6,438) | 4,534) | 6,990) | 7,875) | 12,559) | 11,833) | |
| Total capital | 14,562) | 13,574) | 16,034) | 15,636) | 14,671) | 13,907) | |
| Solvency Ratio | |||||||
| Debt to capital1 | 0.56 | 0.67 | 0.56 | 0.50 | 0.14 | 0.15 | |
| Benchmarks | |||||||
| Debt to Capital, Competitors2 | |||||||
| lululemon athletica inc. | — | — | — | — | — | — | |
| Nike Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).
1 2017 Calculation
Debt to capital = Total debt ÷ Total capital
= 8,124 ÷ 14,562 = 0.56
2 Click competitor name to see calculations.
- Total Debt
- The total debt exhibited a significant increase between 2013 and 2014, rising from 2,112 million USD to 7,761 million USD. This elevated level was maintained at a similar high level through 2015 and 2016, with peaks around 9,040 million USD, before decreasing somewhat in 2017 to 8,124 million USD. This suggests a major acquisition or capital structure change occurred starting in 2014, leading to substantially higher leverage.
- Total Capital
- The total capital showed a steady upward trend from 13,907 million USD in 2012 to a peak of 16,034 million USD in 2015. Following 2015, total capital decreased to 13,574 million USD in 2016 before slightly recovering to 14,562 million USD in 2017. This movement could reflect shifts in equity financing, retained earnings, or changes in asset base corresponding to the debt fluctuations.
- Debt to Capital Ratio
- The debt to capital ratio remained low and stable at around 0.14–0.15 in 2012 and 2013. However, beginning in 2014, the ratio sharply increased to 0.5 and further rose to a peak of 0.67 in 2016, indicating a substantial increase in leverage. In 2017, the ratio decreased to 0.56 but remained well above the pre-2014 levels, confirming that debt financing became a much larger component of the capital structure during this period.
- Overall Trends and Insights
- The data indicates a strategic shift towards greater reliance on debt financing starting in 2014, likely associated with a major investment or acquisition. This shift significantly increased financial leverage, as reflected in both the surge in total debt and the debt to capital ratio. Despite fluctuations, total capital remained relatively stable, suggesting that equity levels did not increase proportionally with debt. By 2017, some deleveraging had occurred, though the company maintained a higher risk profile than in earlier years. The period from 2014 onward reflects a transition to a more debt-heavy capital structure, which may have implications for financial risk and cost of capital.
Debt to Assets
Monsanto Co., debt to assets calculation, comparison to benchmarks
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Short-term debt, including current portion of long-term debt | 870) | 1,587) | 615) | 233) | 51) | 36) | |
| Long-term debt, excluding current portion | 7,254) | 7,453) | 8,429) | 7,528) | 2,061) | 2,038) | |
| Total debt | 8,124) | 9,040) | 9,044) | 7,761) | 2,112) | 2,074) | |
| Total assets | 21,333) | 19,736) | 21,920) | 21,981) | 20,664) | 20,224) | |
| Solvency Ratio | |||||||
| Debt to assets1 | 0.38 | 0.46 | 0.41 | 0.35 | 0.10 | 0.10 | |
| Benchmarks | |||||||
| Debt to Assets, Competitors2 | |||||||
| lululemon athletica inc. | — | — | — | — | — | — | |
| Nike Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).
1 2017 Calculation
Debt to assets = Total debt ÷ Total assets
= 8,124 ÷ 21,333 = 0.38
2 Click competitor name to see calculations.
- Total Debt
- The total debt remained relatively stable from 2012 to 2013, with a marginal increase from 2,074 million to 2,112 million US dollars. However, a significant escalation is observed in 2014, when the debt surged to 7,761 million US dollars, more than tripling the previous year’s figure. This elevated level of debt continued into 2015 and 2016, reaching 9,044 million US dollars in both years. By 2017, there was a reduction in total debt to 8,124 million US dollars, indicating a strategic decrease in leverage after a period of substantial increase.
- Total Assets
- Total assets showed a gradual upward trend from 20,224 million US dollars in 2012 to 21,981 million US dollars in 2014. Despite this increase, asset levels flattened between 2014 and 2015, remaining nearly constant around 21,920 million US dollars. In 2016, a decrease occurred, with assets declining to 19,736 million US dollars. This was followed by a recovery in 2017, when total assets rose again to 21,333 million US dollars, approaching levels observed earlier in the period.
- Debt to Assets Ratio
- The debt to assets ratio remained low and stable at 0.1 from 2012 to 2013, corresponding with the relatively low and steady total debt figures. A marked increase to 0.35 was noted in 2014, aligning with the substantial rise in total debt and a moderate increase in assets. This ratio continued to climb in the subsequent years, peaking at 0.46 in 2016, reflecting a period of elevated leverage and declining assets. By 2017, the ratio had decreased to 0.38, indicative of some deleveraging or asset base improvement.
- Overall Insights
- The data reveals a period of stability in debt and assets in the early years, followed by a pronounced increase in leverage starting in 2014. The surge in total debt significantly outpaced asset growth, resulting in a higher debt to assets ratio and elevated financial risk. The decrease in assets in 2016, combined with high debt levels, further intensified this risk. However, signs of mitigation appear in 2017, with reductions in debt and a rebound in assets leading to improved leverage metrics. This suggests a possible strategic shift toward strengthening the balance sheet after a phase of aggressive borrowing.
Financial Leverage
Monsanto Co., financial leverage calculation, comparison to benchmarks
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Total assets | 21,333) | 19,736) | 21,920) | 21,981) | 20,664) | 20,224) | |
| Total Monsanto Company shareowners’ equity | 6,438) | 4,534) | 6,990) | 7,875) | 12,559) | 11,833) | |
| Solvency Ratio | |||||||
| Financial leverage1 | 3.31 | 4.35 | 3.14 | 2.79 | 1.65 | 1.71 | |
| Benchmarks | |||||||
| Financial Leverage, Competitors2 | |||||||
| lululemon athletica inc. | — | — | — | — | — | — | |
| Nike Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).
1 2017 Calculation
Financial leverage = Total assets ÷ Total Monsanto Company shareowners’ equity
= 21,333 ÷ 6,438 = 3.31
2 Click competitor name to see calculations.
- Total Assets
- The total assets showed a moderate increase from 20,224 million US dollars in 2012 to a peak of 21,981 million US dollars in 2014. After reaching this peak, the assets slightly declined to 19,736 million in 2016 before rising again to 21,333 million in 2017. This indicates a relatively stable asset base with some fluctuations over the period.
- Total Shareowners’ Equity
- The total shareholders' equity experienced a notable decline throughout the observed years. Starting at 11,833 million US dollars in 2012, equity increased slightly to 12,559 million in 2013 but then sharply decreased to 7,875 million in 2014. This downward trend continued through 2016, reaching a low of 4,534 million, before a modest increase to 6,438 million in 2017. The substantial reduction in equity suggests significant changes in the company’s capital structure or accumulated losses during this period.
- Financial Leverage
- Financial leverage exhibited an increasing trend from 1.71 in 2012 to a maximum of 4.35 in 2016, indicating a growing reliance on debt relative to equity. The ratio decreased to 3.31 in 2017 but remained significantly higher than the initial levels. The rising leverage corresponds with the decline in equity and suggests increased financial risk and potential pressure on the company’s solvency.
Interest Coverage
Monsanto Co., interest coverage calculation, comparison to benchmarks
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net income attributable to Monsanto Company | 2,260) | 1,336) | 2,314) | 2,740) | 2,482) | 2,045) | |
| Add: Net income attributable to noncontrolling interest | 13) | (23) | 11) | 22) | 43) | 48) | |
| Less: Income on discontinued operations | 13) | 17) | 28) | 13) | 11) | 6) | |
| Add: Income tax expense | 626) | 695) | 864) | 1,078) | 915) | 901) | |
| Add: Interest expense | 452) | 436) | 433) | 248) | 172) | 191) | |
| Earnings before interest and tax (EBIT) | 3,338) | 2,427) | 3,594) | 4,075) | 3,601) | 3,179) | |
| Solvency Ratio | |||||||
| Interest coverage1 | 7.38 | 5.57 | 8.30 | 16.43 | 20.94 | 16.64 | |
| Benchmarks | |||||||
| Interest Coverage, Competitors2 | |||||||
| lululemon athletica inc. | — | — | — | — | — | — | |
| Nike Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).
1 2017 Calculation
Interest coverage = EBIT ÷ Interest expense
= 3,338 ÷ 452 = 7.38
2 Click competitor name to see calculations.
- Earnings Before Interest and Tax (EBIT)
- The EBIT values demonstrate a generally upward trend from 2012 to 2014, increasing from 3,179 million to 4,075 million US dollars. However, a decline is observed in 2015 and 2016, with EBIT dropping to 3,594 million and then more significantly to 2,427 million. In 2017, there is a recovery to 3,338 million, though this level remains below the peak recorded in 2014.
- Interest Expense
- Interest expense shows a gradual upward trend over the entire period. Starting at 191 million US dollars in 2012, it decreases slightly in 2013 to 172 million, then rises steadily thereafter, reaching 452 million by 2017. The increase in interest expense is particularly notable from 2014 onward.
- Interest Coverage Ratio
- The interest coverage ratio, indicating the company's ability to cover interest expenses with EBIT, exhibits a declining trend over the period. The ratio peaks at 20.94 in 2013, suggesting strong coverage, but falls sharply to 8.3 in 2015 and continues declining to 5.57 in 2016. A slight improvement to 7.38 is observed in 2017. Despite this partial recovery, the ratio in 2017 remains significantly lower than the earlier years, reflecting increased risk related to interest obligations amid fluctuating EBIT and rising interest expenses.
Fixed Charge Coverage
Monsanto Co., fixed charge coverage calculation, comparison to benchmarks
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net income attributable to Monsanto Company | 2,260) | 1,336) | 2,314) | 2,740) | 2,482) | 2,045) | |
| Add: Net income attributable to noncontrolling interest | 13) | (23) | 11) | 22) | 43) | 48) | |
| Less: Income on discontinued operations | 13) | 17) | 28) | 13) | 11) | 6) | |
| Add: Income tax expense | 626) | 695) | 864) | 1,078) | 915) | 901) | |
| Add: Interest expense | 452) | 436) | 433) | 248) | 172) | 191) | |
| Earnings before interest and tax (EBIT) | 3,338) | 2,427) | 3,594) | 4,075) | 3,601) | 3,179) | |
| Add: Rent expense | 262) | 256) | 273) | 272) | 259) | 248) | |
| Earnings before fixed charges and tax | 3,600) | 2,683) | 3,867) | 4,347) | 3,860) | 3,427) | |
| Interest expense | 452) | 436) | 433) | 248) | 172) | 191) | |
| Rent expense | 262) | 256) | 273) | 272) | 259) | 248) | |
| Fixed charges | 714) | 692) | 706) | 520) | 431) | 439) | |
| Solvency Ratio | |||||||
| Fixed charge coverage1 | 5.04 | 3.88 | 5.48 | 8.36 | 8.96 | 7.81 | |
| Benchmarks | |||||||
| Fixed Charge Coverage, Competitors2 | |||||||
| lululemon athletica inc. | — | — | — | — | — | — | |
| Nike Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).
1 2017 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 3,600 ÷ 714 = 5.04
2 Click competitor name to see calculations.
- Earnings before fixed charges and tax
- The earnings before fixed charges and tax demonstrated an overall upward trend from 2012 to 2014, increasing from 3,427 million US dollars in 2012 to a peak of 4,347 million in 2014. However, this was followed by a decline in 2015 and a more significant drop in 2016 to 2,683 million. In 2017, a recovery was evident, with earnings rising again to 3,600 million, though still below the earlier peak levels.
- Fixed charges
- Fixed charges displayed relative stability during the initial years, staying around the range of 430-520 million from 2012 to 2014. A marked increase was observed in 2015, with fixed charges rising to 706 million, and then remaining elevated at 692 million in 2016 and 714 million in 2017. This indicates a significant rise in fixed financial obligations starting in 2015.
- Fixed charge coverage ratio
- The fixed charge coverage ratio initially improved from 7.81 in 2012 to 8.96 in 2013, indicating better coverage of fixed charges by earnings. It then declined slightly in 2014 to 8.36 but remained relatively strong. From 2015 onward, there was a pronounced decrease in coverage, reaching a low of 3.88 in 2016, which suggests increased difficulty in covering fixed charges from earnings during this period. A modest improvement was seen in 2017, rising to 5.04, though the coverage ratio stayed below earlier years’ levels.