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)
Northrop Grumman Corp., solvency ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The analysis of financial leverage and debt-related ratios over the five-year period reveals a consistent improvement in the company’s capital structure and ability to service debt. There is a clear downward trend in leverage, indicating reduced reliance on debt financing relative to equity and overall capital.
- Debt to Equity Ratios
- The standard debt to equity ratio decreased steadily from 1.76 in 2018 to 0.84 in 2022, reflecting a substantial reduction in debt relative to shareholders' equity. When including operating lease liabilities, the decline is less pronounced but still visible, moving from 1.76 to 0.98 over the same period. This suggests the company has reduced its debt burden while managing off-balance-sheet lease obligations more conservatively.
- Debt to Capital Ratios
- Both the debt to capital and the adjusted debt to capital ratios showed a consistent decline from 2018 through 2022. The debt to capital ratio shrank from 0.64 to 0.46, and the inclusion of operating lease liabilities resulted in a decline from 0.64 to 0.49. This indicates a deliberate effort to improve the company’s capital structure by reducing debt as a proportion of total capital, contributing to long-term financial stability.
- Debt to Assets Ratios
- The debt to assets ratio fell from 0.38 in 2018 to 0.29 in 2022, demonstrating a reduction in financial risk associated with debt against the company's total asset base. Including operating lease liabilities, the ratio remained higher but still declined from 0.38 to 0.34, reflecting a consistent reduction in leverage and stronger asset coverage.
- Financial Leverage Ratio
- The financial leverage ratio decreased markedly from 4.60 in 2018 to 2.86 in 2022. This substantial decrease indicates that the company’s equity base has grown relative to its total assets and liabilities, suggesting a stronger equity cushion and potentially lower financial risk.
- Interest and Fixed Charge Coverage Ratios
- The interest coverage ratio improved irregularly but significantly rose to a peak of 17.08 in 2021 before adjusting to 12.53 in 2022. This upward trend indicates enhanced ability to meet interest obligations from operating earnings, highlighting improved profitability and interest expense management. Fixed charge coverage, which includes lease payments and other obligations, followed a similar pattern, rising to a high of 11.26 in 2021 before decreasing to 7.96 in 2022. This trend suggests the company improved its overall capacity to cover fixed financial commitments over the period, although with some volatility in the last year.
Overall, the data reflects a positive progression toward a stronger and less leveraged financial position. The reduction in debt metrics signifies strategic deleveraging, while higher coverage ratios suggest improved earnings quality and the ability to service debt and lease obligations more comfortably. Some volatility in coverage ratios in recent years warrants monitoring, but the general trend points to enhanced financial stability and risk management.
Debt Ratios
Coverage Ratios
Debt to Equity
Northrop Grumman Corp., debt to equity calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term debt | 1,072) | 6) | 742) | 1,109) | 517) | |
| Long-term debt, net of current portion | 11,805) | 12,777) | 14,261) | 12,770) | 13,883) | |
| Total debt | 12,877) | 12,783) | 15,003) | 13,879) | 14,400) | |
| Shareholders’ equity | 15,312) | 12,926) | 10,579) | 8,819) | 8,187) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.84 | 0.99 | 1.42 | 1.57 | 1.76 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.33 | 2.29 | 2.42 | — | — | |
| Eaton Corp. plc | 0.51 | 0.52 | 0.54 | — | — | |
| GE Aerospace | 0.89 | 0.87 | 2.11 | — | — | |
| Honeywell International Inc. | 1.17 | 1.06 | 1.28 | — | — | |
| Lockheed Martin Corp. | 1.68 | 1.07 | 2.02 | — | — | |
| RTX Corp. | 0.44 | 0.43 | 0.44 | — | — | |
| Debt to Equity, Sector | ||||||
| Capital Goods | 1.33 | 1.26 | 1.75 | — | — | |
| Debt to Equity, Industry | ||||||
| Industrials | 1.42 | 1.37 | 1.82 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to equity = Total debt ÷ Shareholders’ equity
= 12,877 ÷ 15,312 = 0.84
2 Click competitor name to see calculations.
- Total Debt
- The total debt saw a fluctuating trend over the five-year period. It decreased slightly from 14,400 million USD in 2018 to 13,879 million USD in 2019, then increased to reach a peak of 15,003 million USD in 2020. Following this, a decline ensued, with debt falling to 12,783 million USD in 2021 and remaining relatively stable at 12,877 million USD in 2022. Overall, the total debt was lower in the last two years compared to the initial years.
- Shareholders’ Equity
- Shareholders’ equity exhibited a consistent upward trajectory throughout the period. It rose steadily each year, starting at 8,187 million USD in 2018 and increasing to 15,312 million USD by 2022. This reflects continual strengthening of the equity base, with equity nearly doubling over the five-year span.
- Debt to Equity Ratio
- The debt to equity ratio demonstrated a marked improvement over time. In 2018, the ratio was 1.76, indicating a relatively high debt burden compared to equity. This ratio decreased each year, falling to 0.84 by 2022. This declining trend signifies that the company has been reducing its relative leverage, improving financial stability and relying more on equity financing compared to debt.
Debt to Equity (including Operating Lease Liability)
Northrop Grumman Corp., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term debt | 1,072) | 6) | 742) | 1,109) | 517) | |
| Long-term debt, net of current portion | 11,805) | 12,777) | 14,261) | 12,770) | 13,883) | |
| Total debt | 12,877) | 12,783) | 15,003) | 13,879) | 14,400) | |
| Current operating lease liabilities (included in Other current liabilities) | 299) | 284) | 263) | 261) | —) | |
| Non-current operating lease liabilities | 1,824) | 1,590) | 1,343) | 1,308) | —) | |
| Total debt (including operating lease liability) | 15,000) | 14,657) | 16,609) | 15,448) | 14,400) | |
| Shareholders’ equity | 15,312) | 12,926) | 10,579) | 8,819) | 8,187) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 0.98 | 1.13 | 1.57 | 1.75 | 1.76 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.37 | 2.33 | 2.46 | — | — | |
| Eaton Corp. plc | 0.54 | 0.55 | 0.57 | — | — | |
| GE Aerospace | 0.96 | 0.94 | 2.20 | — | — | |
| Honeywell International Inc. | 1.23 | 1.11 | 1.32 | — | — | |
| Lockheed Martin Corp. | 1.81 | 1.19 | 2.21 | — | — | |
| RTX Corp. | 0.47 | 0.46 | 0.47 | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 1.39 | 1.32 | 1.81 | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Industrials | 1.59 | 1.54 | 2.00 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Shareholders’ equity
= 15,000 ÷ 15,312 = 0.98
2 Click competitor name to see calculations.
The financial data presents a clear trend in the company's leverage and equity position over the five-year period ending in 2022.
- Total debt (including operating lease liability)
- The total debt increased steadily from 14,400 million USD in 2018 to a peak of 16,609 million USD in 2020. Subsequently, it declined to 14,657 million USD in 2021 before experiencing a modest increase to 15,000 million USD in 2022. This indicates a cautious approach to debt management with an overall stabilization in the last two years.
- Shareholders’ equity
- The shareholders' equity showed consistent and substantial growth throughout the period. Starting at 8,187 million USD in 2018, it rose each year to reach 15,312 million USD in 2022. This rise reflects strong retained earnings, capital injections, or asset revaluations, enhancing the company’s net assets.
- Debt to equity ratio (including operating lease liability)
- The debt to equity ratio exhibited a declining trend, starting at 1.76 in 2018 and decreasing steadily to 0.98 in 2022. This reduction implies an improvement in the company's financial leverage, indicating that equity growth outpaced debt accumulation, leading to a stronger balance sheet and potentially lower financial risk.
Overall, the data reflects a firm moving towards lower leverage with a stronger equity base, which may improve creditworthiness and financial stability. The balance between debt and equity has improved notably, particularly after 2020, suggesting strategic financial management aimed at sustainability and risk mitigation.
Debt to Capital
Northrop Grumman Corp., debt to capital calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term debt | 1,072) | 6) | 742) | 1,109) | 517) | |
| Long-term debt, net of current portion | 11,805) | 12,777) | 14,261) | 12,770) | 13,883) | |
| Total debt | 12,877) | 12,783) | 15,003) | 13,879) | 14,400) | |
| Shareholders’ equity | 15,312) | 12,926) | 10,579) | 8,819) | 8,187) | |
| Total capital | 28,189) | 25,709) | 25,582) | 22,698) | 22,587) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.46 | 0.50 | 0.59 | 0.61 | 0.64 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Boeing Co. | 1.39 | 1.35 | 1.40 | — | — | |
| Caterpillar Inc. | 0.70 | 0.70 | 0.71 | — | — | |
| Eaton Corp. plc | 0.34 | 0.34 | 0.35 | — | — | |
| GE Aerospace | 0.47 | 0.47 | 0.68 | — | — | |
| Honeywell International Inc. | 0.54 | 0.51 | 0.56 | — | — | |
| Lockheed Martin Corp. | 0.63 | 0.52 | 0.67 | — | — | |
| RTX Corp. | 0.31 | 0.30 | 0.31 | — | — | |
| Debt to Capital, Sector | ||||||
| Capital Goods | 0.57 | 0.56 | 0.64 | — | — | |
| Debt to Capital, Industry | ||||||
| Industrials | 0.59 | 0.58 | 0.65 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to capital = Total debt ÷ Total capital
= 12,877 ÷ 28,189 = 0.46
2 Click competitor name to see calculations.
- Total debt
- The total debt experienced fluctuations over the five-year period. Starting at $14,400 million in 2018, it slightly decreased to $13,879 million in 2019, then increased to $15,003 million in 2020. Subsequently, it declined more notably to $12,783 million in 2021 and remained relatively stable at $12,877 million in 2022. This pattern indicates a general reduction in debt levels after peaking in 2020.
- Total capital
- Total capital showed a consistent upward trend throughout the period. Beginning at $22,587 million in 2018, it saw a slight increase to $22,698 million in 2019, followed by more significant growth to $25,582 million in 2020 and $25,709 million in 2021. This upward momentum continued with a notable rise to $28,189 million in 2022. The steady increase suggests ongoing capital expansion and possibly reinvestment or earnings retention contributing to capital growth.
- Debt to capital ratio
- The debt to capital ratio declined steadily over the analyzed years, moving from 0.64 in 2018 to 0.61 in 2019, then to 0.59 in 2020. The trend accelerated afterward, reaching 0.50 in 2021 and further dropping to 0.46 in 2022. This consistent decrease reflects a reduction in reliance on debt relative to overall capital, indicating improved capital structure and potentially lower financial risk.
Debt to Capital (including Operating Lease Liability)
Northrop Grumman Corp., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term debt | 1,072) | 6) | 742) | 1,109) | 517) | |
| Long-term debt, net of current portion | 11,805) | 12,777) | 14,261) | 12,770) | 13,883) | |
| Total debt | 12,877) | 12,783) | 15,003) | 13,879) | 14,400) | |
| Current operating lease liabilities (included in Other current liabilities) | 299) | 284) | 263) | 261) | —) | |
| Non-current operating lease liabilities | 1,824) | 1,590) | 1,343) | 1,308) | —) | |
| Total debt (including operating lease liability) | 15,000) | 14,657) | 16,609) | 15,448) | 14,400) | |
| Shareholders’ equity | 15,312) | 12,926) | 10,579) | 8,819) | 8,187) | |
| Total capital (including operating lease liability) | 30,312) | 27,583) | 27,188) | 24,267) | 22,587) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.49 | 0.53 | 0.61 | 0.64 | 0.64 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 1.37 | 1.34 | 1.39 | — | — | |
| Caterpillar Inc. | 0.70 | 0.70 | 0.71 | — | — | |
| Eaton Corp. plc | 0.35 | 0.36 | 0.36 | — | — | |
| GE Aerospace | 0.49 | 0.49 | 0.69 | — | — | |
| Honeywell International Inc. | 0.55 | 0.53 | 0.57 | — | — | |
| Lockheed Martin Corp. | 0.64 | 0.54 | 0.69 | — | — | |
| RTX Corp. | 0.32 | 0.31 | 0.32 | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.58 | 0.57 | 0.64 | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.61 | 0.61 | 0.67 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 15,000 ÷ 30,312 = 0.49
2 Click competitor name to see calculations.
- Total debt (including operating lease liability)
- The total debt increased steadily from 14,400 million USD in 2018, peaking at 16,609 million USD in 2020. Following this, there was a decline to 14,657 million USD in 2021, with a slight increase to 15,000 million USD in 2022. This indicates an overall rising trend in debt until 2020, followed by a partial reduction and stabilization thereafter.
- Total capital (including operating lease liability)
- Total capital demonstrated a consistent upward trajectory throughout the period. It rose from 22,587 million USD in 2018 to 30,312 million USD in 2022. The growth was especially notable post-2020, reflecting an expansion in the company's capital base and possibly improved financing or reinvestment strategies.
- Debt to capital (including operating lease liability)
- The debt to capital ratio showed a clear downward trend over the five years. It remained steady at 0.64 in 2018 and 2019, then declined to 0.61 in 2020 and further decreased significantly to 0.53 in 2021. The ratio reached its lowest point at 0.49 in 2022. This suggests an improvement in the company’s leverage position, indicating a reduction in reliance on debt relative to the overall capital structure.
Debt to Assets
Northrop Grumman Corp., debt to assets calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term debt | 1,072) | 6) | 742) | 1,109) | 517) | |
| Long-term debt, net of current portion | 11,805) | 12,777) | 14,261) | 12,770) | 13,883) | |
| Total debt | 12,877) | 12,783) | 15,003) | 13,879) | 14,400) | |
| Total assets | 43,755) | 42,579) | 44,469) | 41,089) | 37,653) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.29 | 0.30 | 0.34 | 0.34 | 0.38 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Boeing Co. | 0.42 | 0.42 | 0.42 | — | — | |
| Caterpillar Inc. | 0.45 | 0.46 | 0.47 | — | — | |
| Eaton Corp. plc | 0.25 | 0.25 | 0.25 | — | — | |
| GE Aerospace | 0.17 | 0.18 | 0.30 | — | — | |
| Honeywell International Inc. | 0.31 | 0.30 | 0.35 | — | — | |
| Lockheed Martin Corp. | 0.29 | 0.23 | 0.24 | — | — | |
| RTX Corp. | 0.20 | 0.20 | 0.20 | — | — | |
| Debt to Assets, Sector | ||||||
| Capital Goods | 0.28 | 0.28 | 0.32 | — | — | |
| Debt to Assets, Industry | ||||||
| Industrials | 0.31 | 0.30 | 0.33 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to assets = Total debt ÷ Total assets
= 12,877 ÷ 43,755 = 0.29
2 Click competitor name to see calculations.
- Total Debt
- The total debt experienced fluctuations over the five-year period. It decreased from $14,400 million in 2018 to $13,879 million in 2019, then increased to $15,003 million in 2020. Subsequently, it declined significantly to $12,783 million in 2021 and remained relatively stable at $12,877 million in 2022. This pattern indicates a peak in debt during 2020 followed by a notable reduction in the following years.
- Total Assets
- Total assets showed an increasing trend from 2018 through 2020, rising from $37,653 million to $44,469 million. However, in 2021, there was a decline to $42,579 million, followed by a modest recovery to $43,755 million in 2022. The overall trend suggests growth in asset base with some volatility in the last two years.
- Debt to Assets Ratio
- The debt to assets ratio demonstrated a steady downward trend over the period. Starting at 0.38 in 2018, it decreased consistently each year to reach 0.29 by 2022. This decreasing ratio reflects an improvement in leverage, indicating that the company reduced its reliance on debt relative to its asset base across these years.
Debt to Assets (including Operating Lease Liability)
Northrop Grumman Corp., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term debt | 1,072) | 6) | 742) | 1,109) | 517) | |
| Long-term debt, net of current portion | 11,805) | 12,777) | 14,261) | 12,770) | 13,883) | |
| Total debt | 12,877) | 12,783) | 15,003) | 13,879) | 14,400) | |
| Current operating lease liabilities (included in Other current liabilities) | 299) | 284) | 263) | 261) | —) | |
| Non-current operating lease liabilities | 1,824) | 1,590) | 1,343) | 1,308) | —) | |
| Total debt (including operating lease liability) | 15,000) | 14,657) | 16,609) | 15,448) | 14,400) | |
| Total assets | 43,755) | 42,579) | 44,469) | 41,089) | 37,653) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.34 | 0.34 | 0.37 | 0.38 | 0.38 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 0.43 | 0.43 | 0.43 | — | — | |
| Caterpillar Inc. | 0.46 | 0.46 | 0.48 | — | — | |
| Eaton Corp. plc | 0.26 | 0.27 | 0.27 | — | — | |
| GE Aerospace | 0.19 | 0.19 | 0.31 | — | — | |
| Honeywell International Inc. | 0.33 | 0.32 | 0.36 | — | — | |
| Lockheed Martin Corp. | 0.32 | 0.26 | 0.26 | — | — | |
| RTX Corp. | 0.21 | 0.21 | 0.21 | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.30 | 0.29 | 0.33 | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.34 | 0.34 | 0.36 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 15,000 ÷ 43,755 = 0.34
2 Click competitor name to see calculations.
- Total Debt (including operating lease liability)
- The total debt demonstrated a generally increasing trend from 2018 through 2020, rising from $14,400 million to $16,609 million. However, in 2021, total debt declined notably to $14,657 million and then showed a slight increase to $15,000 million in 2022. This suggests an initial period of increasing leverage followed by a partial reduction and stabilization of debt levels.
- Total Assets
- Total assets consistently increased from $37,653 million in 2018 to a peak of $44,469 million in 2020. In 2021, total assets decreased to $42,579 million, followed by a minor rebound to $43,755 million in 2022. Overall, the asset base expanded over the five-year period but with some volatility starting in 2021.
- Debt to Assets Ratio (including operating lease liability)
- The debt-to-assets ratio remained relatively stable from 2018 to 2019 at 0.38, then slightly decreased to 0.37 in 2020. A more pronounced decline occurred in 2021, when the ratio dropped to 0.34, maintaining that level in 2022. This decreasing ratio reflects a reduction in leverage relative to asset size, indicating improved financial structure or asset growth outpacing debt accumulation during the latter years.
Financial Leverage
Northrop Grumman Corp., financial leverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 43,755) | 42,579) | 44,469) | 41,089) | 37,653) | |
| Shareholders’ equity | 15,312) | 12,926) | 10,579) | 8,819) | 8,187) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 2.86 | 3.29 | 4.20 | 4.66 | 4.60 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 5.16 | 5.02 | 5.11 | — | — | |
| Eaton Corp. plc | 2.06 | 2.07 | 2.13 | — | — | |
| GE Aerospace | 5.16 | 4.93 | 7.13 | — | — | |
| Honeywell International Inc. | 3.73 | 3.47 | 3.68 | — | — | |
| Lockheed Martin Corp. | 5.71 | 4.64 | 8.43 | — | — | |
| RTX Corp. | 2.19 | 2.21 | 2.25 | — | — | |
| Financial Leverage, Sector | ||||||
| Capital Goods | 4.71 | 4.55 | 5.54 | — | — | |
| Financial Leverage, Industry | ||||||
| Industrials | 4.65 | 4.52 | 5.49 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Financial leverage = Total assets ÷ Shareholders’ equity
= 43,755 ÷ 15,312 = 2.86
2 Click competitor name to see calculations.
- Total assets
- The total assets show an overall increasing trend from 37,653 million US dollars in 2018 to 43,755 million US dollars in 2022. There was steady growth from 2018 to 2020, reaching 44,469 million, followed by a slight decline in 2021 to 42,579 million, and then a modest recovery in 2022.
- Shareholders’ equity
- Shareholders' equity has exhibited consistent growth throughout the period, rising from 8,187 million US dollars in 2018 to 15,312 million US dollars in 2022. The most notable increases occurred between 2020 and 2022, reflecting strengthening equity positions within this timeframe.
- Financial leverage
- Financial leverage, measured by the ratio of total assets to shareholders' equity, has steadily declined from 4.6 in 2018 to 2.86 in 2022. This reduction suggests a decreasing reliance on debt relative to equity over the years, indicating a trend towards a more conservative financial structure.
Interest Coverage
Northrop Grumman Corp., interest coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings | 4,896) | 7,005) | 3,189) | 2,248) | 3,229) | |
| Add: Income tax expense | 940) | 1,933) | 539) | 300) | 513) | |
| Add: Interest expense | 506) | 556) | 593) | 528) | 562) | |
| Earnings before interest and tax (EBIT) | 6,342) | 9,494) | 4,321) | 3,076) | 4,304) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 12.53 | 17.08 | 7.29 | 5.83 | 7.66 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Boeing Co. | -0.98 | -0.88 | -5.71 | — | — | |
| Caterpillar Inc. | 20.80 | 17.88 | 8.80 | — | — | |
| Eaton Corp. plc | 21.22 | 21.11 | 12.72 | — | — | |
| GE Aerospace | 1.88 | -0.96 | 2.59 | — | — | |
| Honeywell International Inc. | 16.41 | 22.09 | 17.75 | — | — | |
| Lockheed Martin Corp. | 11.72 | 14.27 | 14.93 | — | — | |
| RTX Corp. | 5.64 | 4.71 | -0.65 | — | — | |
| Interest Coverage, Sector | ||||||
| Capital Goods | 4.84 | 3.98 | 1.99 | — | — | |
| Interest Coverage, Industry | ||||||
| Industrials | 4.98 | 5.14 | 1.25 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Interest coverage = EBIT ÷ Interest expense
= 6,342 ÷ 506 = 12.53
2 Click competitor name to see calculations.
- Earnings before interest and tax (EBIT)
- The EBIT experienced significant fluctuations over the five-year period. Starting at 4,304 million US dollars in 2018, it declined notably to 3,076 million in 2019. This was followed by a recovery in 2020 with EBIT rising to 4,321 million. A substantial increase occurred in 2021, reaching a peak of 9,494 million. However, in 2022, EBIT decreased to 6,342 million, which, while lower than the 2021 peak, remained well above the levels seen in earlier years.
- Interest expense
- Interest expenses demonstrated a gradual decline across the period. Beginning at 562 million US dollars in 2018, interest expense decreased slightly year-over-year, reaching 506 million by 2022. The reduction was consistent but relatively modest, suggesting effective management of debt costs or reduction in reported interest costs.
- Interest coverage ratio
- The interest coverage ratio showed substantial variation that mirrored the EBIT trends. Starting at a healthy 7.66 in 2018, it declined to 5.83 in 2019, reflecting the drop in EBIT. The ratio then improved to 7.29 in 2020 and surged to an exceptional 17.08 in 2021, in line with the peak EBIT. In 2022, the ratio dipped to 12.53, which still signifies strong earnings ability to cover interest expenses, although it is lower than the previous year’s peak.
Fixed Charge Coverage
Northrop Grumman Corp., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings | 4,896) | 7,005) | 3,189) | 2,248) | 3,229) | |
| Add: Income tax expense | 940) | 1,933) | 539) | 300) | 513) | |
| Add: Interest expense | 506) | 556) | 593) | 528) | 562) | |
| Earnings before interest and tax (EBIT) | 6,342) | 9,494) | 4,321) | 3,076) | 4,304) | |
| Add: Operating lease cost | 332) | 315) | 320) | 318) | 375) | |
| Earnings before fixed charges and tax | 6,674) | 9,809) | 4,641) | 3,394) | 4,679) | |
| Interest expense | 506) | 556) | 593) | 528) | 562) | |
| Operating lease cost | 332) | 315) | 320) | 318) | 375) | |
| Fixed charges | 838) | 871) | 913) | 846) | 937) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 7.96 | 11.26 | 5.08 | 4.01 | 4.99 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Boeing Co. | -0.70 | -0.64 | -4.75 | — | — | |
| Caterpillar Inc. | 14.92 | 12.73 | 6.58 | — | — | |
| Eaton Corp. plc | 10.01 | 10.40 | 6.24 | — | — | |
| GE Aerospace | 1.35 | -0.22 | 1.93 | — | — | |
| Honeywell International Inc. | 11.00 | 13.67 | 11.49 | — | — | |
| Lockheed Martin Corp. | 8.44 | 9.95 | 11.12 | — | — | |
| RTX Corp. | 4.40 | 3.66 | -0.22 | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Capital Goods | 3.61 | 3.06 | 1.66 | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Industrials | 3.30 | 3.44 | 1.12 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 6,674 ÷ 838 = 7.96
2 Click competitor name to see calculations.
- Earnings before fixed charges and tax
-
The earnings before fixed charges and tax exhibited notable fluctuations over the observed five-year period. Starting at 4,679 million US dollars in 2018, earnings dropped significantly in 2019 to 3,394 million US dollars, indicating a contraction in operating profitability or an increase in operating expenses. However, 2020 saw a recovery with earnings rising again to 4,641 million US dollars, closely nearing the 2018 level. The most pronounced increase occurred in 2021, with earnings more than doubling from the previous year to 9,809 million US dollars, suggesting either improved operational efficiency, higher revenues, or a combination of both. In 2022, earnings decreased to 6,674 million US dollars but remained substantially higher than the levels recorded from 2018 to 2020, indicating a sustained improvement relative to earlier years despite the decline from the peak in 2021.
- Fixed charges
-
Fixed charges demonstrated a declining trend over the period. They began at 937 million US dollars in 2018 and decreased gradually each year to reach 838 million US dollars in 2022. This downward pattern suggests effective management of fixed financial obligations, possibly through refinancing, reduction of debt levels, or improved cost control measures, contributing to the organization's ability to manage its liabilities more efficiently over time.
- Fixed charge coverage ratio
-
The fixed charge coverage ratio, which measures the ability to cover fixed financial obligations with earnings before fixed charges and tax, showed significant variability. The ratio decreased from 4.99 in 2018 to 4.01 in 2019, reflecting the drop in earnings and a relatively stable but still burdening fixed charge level. In 2020, the ratio improved to 5.08, indicating a recovery in earnings relative to fixed charges. The ratio then rose sharply to 11.26 in 2021, commensurate with the substantial increase in earnings during that year, signifying a very strong coverage capability. In 2022, the ratio declined to 7.96 but remained well above the pre-2021 levels, suggesting that despite the earnings decrease from the previous year, the company still maintained a solid capacity to meet fixed financial obligations.