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).
The solvency profile exhibits a marked shift in capital structure between 2012 and 2017, transitioning from a conservative, low-leverage position to a more aggressive debt-funded strategy that peaked in 2016 before experiencing a partial correction in 2017.
- Debt Accumulation and Capital Structure
- A substantial increase in leverage is evident beginning in 2014. The debt to equity ratio rose sharply from 0.17 in 2013 to a peak of 1.99 in 2016. Similarly, the debt to capital ratio increased from 0.14 in 2013 to 0.67 in 2016, indicating a growing reliance on borrowed funds relative to total capital. Both metrics showed a downward correction by August 31, 2017, with debt to equity falling to 1.26 and debt to capital decreasing to 0.56.
- Asset Leverage and Financial Gearing
- The debt to assets ratio followed a parallel trajectory, remaining stable at 0.10 through 2013 before climbing to 0.46 by 2016. This trend is further reflected in the financial leverage ratio, which expanded from 1.65 in 2013 to a peak of 4.35 in 2016, suggesting a significant amplification of the financial risk profile during this period. This leverage moderated to 3.31 in the final reporting year.
- Coverage and Debt Servicing Capacity
- An inverse correlation is observed between the rising debt levels and the capacity to service obligations. Interest coverage declined from a peak of 20.94 in 2013 to a low of 5.57 in 2016. Fixed charge coverage mirrored this decline, dropping from 8.96 in 2013 to 3.88 in 2016. Both ratios experienced a moderate recovery in 2017, with interest coverage rising to 7.38 and fixed charge coverage increasing to 5.04.
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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.
An analysis of solvency ratios between August 31, 2012, and August 31, 2017, reveals a significant shift in the capital structure. The period is characterized by a transition from a conservative, equity-heavy balance sheet to a highly leveraged position, peaking in 2016 before showing signs of stabilization in 2017.
- Total Debt Trends
- Debt levels remained relatively stable between 2012 and 2013, hovering around US$ 2.1 billion. A substantial increase occurred in 2014, with total debt rising to US$ 7.76 billion, and continuing to climb to a peak of US$ 9.04 billion in 2015 and 2016. A moderate reduction to US$ 8.12 billion was observed by August 31, 2017.
- Shareowners' Equity Fluctuations
- Equity experienced a consistent downward trajectory starting in 2014. After reaching a high of US$ 12.56 billion in 2013, equity declined sharply to US$ 7.88 billion in 2014 and reached its lowest point of US$ 4.53 billion in 2016. A partial recovery to US$ 6.44 billion was recorded in the final year of the analysis.
- Debt to Equity Ratio Analysis
- The debt to equity ratio demonstrates a period of aggressive leverage expansion. The ratio remained low at 0.18 and 0.17 during 2012 and 2013, indicating strong solvency. A critical inflection point occurred in 2014, where the ratio increased to 0.99. This trend culminated in 2016 with a peak ratio of 1.99, indicating that total debt was nearly double the total shareowners' equity. By August 31, 2017, the ratio improved to 1.26, reflecting a reduction in financial leverage.
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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.
Analysis of the solvency metrics reveals a substantial shift in the capital structure between 2012 and 2017. The entity transitioned from a position of low financial leverage to a significantly more debt-reliant structure, particularly following a sharp increase in borrowing in 2014.
- Total Debt Trends
- Debt levels remained stable between 2012 and 2013, holding at approximately US$ 2.1 billion. A dramatic escalation occurred in 2014, with total debt rising to US$ 7.76 billion, an increase of approximately 267% in a single year. Borrowing peaked at US$ 9.04 billion in 2015 and 2016, before experiencing a moderate reduction to US$ 8.12 billion by August 31, 2017.
- Total Capital Dynamics
- Total capital showed a steady upward trajectory from US$ 13.91 billion in 2012 to a peak of US$ 16.03 billion in 2015. A notable contraction occurred in 2016, where total capital fell to US$ 13.57 billion, the lowest level since 2012. This figure subsequently recovered to US$ 14.56 billion in 2017.
- Debt to Capital Ratio Evolution
- The debt to capital ratio remained low and stable at 0.15 and 0.14 during 2012 and 2013. A significant surge to 0.50 was recorded in 2014, coinciding with the spike in total debt. The ratio continued to rise, reaching a peak of 0.67 in 2016, driven by the simultaneous increase in debt and the contraction of total capital. By August 31, 2017, the ratio moderated to 0.56, indicating a slight reduction in financial leverage relative to the peak.
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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.
The solvency profile of the organization underwent a significant transformation between 2012 and 2017, shifting from a conservative leverage position to a more aggressive capital structure. A period of stability in the early years was followed by a substantial increase in debt obligations, which peaked in 2016 before showing a moderate reduction in the final year of the period.
- Total Debt Trends
- Debt levels remained relatively constant between 2012 and 2013, hovering around US$ 2.1 billion. A sharp escalation occurred in 2014, where total debt increased to US$ 7,761 million, representing a more than threefold increase. This upward trajectory continued into 2015 and 2016, reaching a peak of approximately US$ 9.04 billion. By August 31, 2017, total debt declined to US$ 8,124 million.
- Total Asset Fluctuations
- Assets exhibited a gradual increase from US$ 20,224 million in 2012 to a peak of US$ 21,981 million in 2014. A slight contraction was observed in 2015, followed by a more pronounced dip to US$ 19,736 million in 2016. The period concluded with a recovery in asset value, rising to US$ 21,333 million by 2017.
- Debt to Assets Ratio Analysis
- The debt to assets ratio remained stable at 0.10 during 2012 and 2013, indicating that only 10% of assets were financed through debt. A significant shift occurred in 2014 as the ratio climbed to 0.35, reflecting the surge in total debt. The ratio continued to rise, peaking at 0.46 in 2016, which signifies that nearly half of the asset base was funded by debt. A corrective trend was observed in 2017, with the ratio decreasing to 0.38, resulting from a combination of debt reduction and asset growth.
The overall analysis indicates a strategic or operational shift starting in 2014 that heavily increased the company's reliance on borrowed capital. Although the solvency position weakened through 2016, the 2017 figures suggest the beginning of a deleveraging process or a stabilization of the balance sheet.
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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.
The company experienced a significant shift in its capital structure between 2012 and 2017, characterized by a substantial increase in financial leverage driven primarily by a contraction in total shareowners' equity.
- Total Assets Stability
- Total assets remained relatively constant over the analyzed period, oscillating between a low of US$ 19,736 million in 2016 and a high of US$ 21,981 million in 2014. This stability suggests that the fluctuations in leverage were not driven by large-scale asset expansion or contraction, but rather by changes in the financing mix.
- Equity Trend Analysis
- A significant downward trend in shareowners' equity is observed following August 31, 2013. Equity declined from US$ 12,559 million in 2013 to a minimum of US$ 4,534 million in 2016, representing a reduction of approximately 64%. A partial recovery occurred by August 31, 2017, with equity rising to US$ 6,438 million.
- Financial Leverage Interpretation
- The financial leverage ratio increased sharply from 1.65 in 2013 to a peak of 4.35 in 2016. This escalation indicates a heightened reliance on debt or other liabilities to finance the company's asset base. The leverage ratio subsequently decreased to 3.31 in 2017, correlating with the rebound in shareowners' equity observed during the same period.
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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.
The analysis of solvency indicators reveals a notable deterioration in the company's ability to service its debt obligations between 2013 and 2016, followed by a partial recovery in 2017. While the organization maintained a strong margin of safety in the early part of the period, the convergence of rising interest costs and volatile operating income significantly compressed the interest coverage ratio.
- Earnings Before Interest and Tax (EBIT)
- Operating performance exhibited volatility over the six-year period. EBIT grew steadily from 3,179 million USD in 2012 to a peak of 4,075 million USD in 2014. However, a downward trend followed, with earnings declining to 2,427 million USD by 2016. A recovery was observed in 2017, with EBIT rising to 3,338 million USD.
- Interest Expense
- A significant upward shift in interest obligations occurred starting in 2014. Interest expenses remained relatively stable and low between 2012 and 2013, ranging from 172 million to 191 million USD. From 2014 onward, these costs increased sharply, jumping to 433 million USD in 2015 and continuing a steady climb to 452 million USD by 2017, indicating a substantial increase in the cost of debt or a higher total debt load.
- Interest Coverage Ratio
- The interest coverage ratio reflects the combined impact of fluctuating EBIT and rising interest costs. The ratio peaked at 20.94 in 2013, signifying a very high capacity to meet interest payments. A precipitous decline followed, with the ratio falling to 8.30 in 2015 and reaching a period low of 5.57 in 2016. The ratio improved to 7.38 in 2017, though it remained well below the levels observed prior to 2015.
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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.
An analysis of the solvency metrics indicates a period of strong coverage that declined significantly mid-period before experiencing a partial recovery. The overall trend is characterized by a contraction in the margin of safety regarding fixed obligations, primarily driven by a combination of fluctuating earnings and rising fixed costs.
- Earnings Before Fixed Charges and Tax
- Operating earnings exhibited a growth trend from 2012 to 2014, peaking at 4,347 million US dollars. This was followed by a substantial decline, reaching a low of 2,683 million US dollars in 2016, representing a 38% decrease from the peak. A recovery was observed in 2017, with earnings rising back to 3,600 million US dollars.
- Fixed Charges
- Fixed obligations remained relatively stable between 2012 and 2013 but experienced a marked increase starting in 2014. A significant escalation occurred between 2014 and 2015, where charges rose from 520 million to 706 million US dollars. These costs remained elevated through 2017, ending the period at 714 million US dollars.
- Fixed Charge Coverage Ratio
- The coverage ratio reached its maximum of 8.96 in 2013, indicating a robust capacity to meet fixed obligations. However, a consistent downward trajectory was observed between 2014 and 2016, with the ratio falling to a minimum of 3.88. This deterioration was the result of the simultaneous decrease in earnings and the increase in fixed charges. By 2017, the ratio improved to 5.04, though it remained well below the levels observed in the early part of the analyzed period.
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