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)
Debt Ratios
Coverage Ratios
Time Warner Inc., solvency ratios
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
Between 2013 and 2017, solvency ratios exhibited a pattern of increasing leverage that peaked in the 2015-2016 period, followed by a notable improvement in the balance sheet structure by the end of 2017. While the reliance on debt grew for the first several years, coverage ratios remained robust, indicating a sustained ability to meet fixed obligations despite the increased leverage.
- Capital Structure and Leverage Trends
- A consistent upward trajectory in leverage was observed from 2013 through 2016. Debt to equity increased from 0.67 to a peak of 1.01 in 2015, before declining to 0.84 by 2017. Debt to capital and debt to assets followed similar paths, peaking in 2015 and 2016 at 0.50 and 0.37 respectively, before contracting in the final year. Financial leverage reached its maximum of 2.71 in 2016, subsequently decreasing to 2.44 in 2017, suggesting a strategic shift toward deleveraging in the final year of the period.
- Debt Servicing and Coverage Capacity
- The ability to service debt remained strong throughout the period, with a significant improvement observed in 2017. Interest coverage fluctuated between 4.46 and 5.13 between 2013 and 2016, eventually rising to a period high of 5.90 in 2017. Fixed charge coverage exhibited a similar trend, reaching a low of 3.68 in 2014 before strengthening to 4.81 by 2017. This increase in coverage ratios, coinciding with the reduction in leverage ratios, indicates an enhanced solvency position and a greater margin of safety for meeting financial commitments.
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Debt to Equity
Time Warner Inc., debt to equity calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Debt due within one year | 5,450) | 1,947) | 198) | 1,118) | 66) | |
| Long-term debt, excluding due within one year | 18,294) | 22,392) | 23,594) | 21,376) | 20,099) | |
| Total debt | 23,744) | 24,339) | 23,792) | 22,494) | 20,165) | |
| Total Time Warner Inc. shareholders’ equity | 28,375) | 24,335) | 23,619) | 24,476) | 29,904) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.84 | 1.00 | 1.01 | 0.92 | 0.67 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Alphabet Inc. | — | — | — | — | — | |
| Comcast Corp. | — | — | — | — | — | |
| Meta Platforms Inc. | — | — | — | — | — | |
| Netflix Inc. | — | — | — | — | — | |
| Walt Disney Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 2017 Calculation
Debt to equity = Total debt ÷ Total Time Warner Inc. shareholders’ equity
= 23,744 ÷ 28,375 = 0.84
2 Click competitor name to see calculations.
Between 2013 and 2017, the solvency profile of the organization experienced a period of increased leverage followed by a partial recovery. The most significant shift in the capital structure occurred between 2013 and 2015, characterized by a simultaneous increase in total debt and a decrease in shareholders' equity.
- Total Debt Trends
- Total debt exhibited a consistent upward trajectory from 2013 at US$ 20,165 million to a peak of US$ 24,339 million in 2016. A slight reduction followed in 2017, with debt levels descending to US$ 23,744 million.
- Shareholders' Equity Trends
- Shareholders' equity demonstrated a downward trend in the early period, falling from US$ 29,904 million in 2013 to a low of US$ 23,619 million in 2015. A recovery phase ensued, with equity rising to US$ 28,375 million by the end of 2017.
- Debt to Equity Ratio Analysis
- The debt to equity ratio rose from 0.67 in 2013 to a peak of 1.01 in 2015, indicating a transition toward a more aggressive capital structure where debt equaled equity. After remaining stable at 1.00 in 2016, the ratio declined to 0.84 in 2017, reflecting an improved solvency position driven by both debt reduction and equity growth.
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Debt to Capital
Time Warner Inc., debt to capital calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Debt due within one year | 5,450) | 1,947) | 198) | 1,118) | 66) | |
| Long-term debt, excluding due within one year | 18,294) | 22,392) | 23,594) | 21,376) | 20,099) | |
| Total debt | 23,744) | 24,339) | 23,792) | 22,494) | 20,165) | |
| Total Time Warner Inc. shareholders’ equity | 28,375) | 24,335) | 23,619) | 24,476) | 29,904) | |
| Total capital | 52,119) | 48,674) | 47,411) | 46,970) | 50,069) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.46 | 0.50 | 0.50 | 0.48 | 0.40 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Alphabet Inc. | — | — | — | — | — | |
| Comcast Corp. | — | — | — | — | — | |
| Meta Platforms Inc. | — | — | — | — | — | |
| Netflix Inc. | — | — | — | — | — | |
| Walt Disney Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 2017 Calculation
Debt to capital = Total debt ÷ Total capital
= 23,744 ÷ 52,119 = 0.46
2 Click competitor name to see calculations.
The solvency profile indicates a period of increasing leverage between 2013 and 2016, followed by a moderate contraction in 2017. The capital structure shifted from a lower debt reliance to a peak where debt constituted half of the total capital, before showing signs of deleveraging in the final observed year.
- Total Debt Trends
- An upward trend in total debt is observed from December 31, 2013, to December 31, 2016, with obligations increasing from US$ 20,165 million to a peak of US$ 24,339 million. The most significant year-over-year increase occurred between 2013 and 2014. A reversal of this trend is noted by December 31, 2017, when total debt decreased to US$ 23,744 million.
- Total Capital Fluctuations
- Total capital experienced an initial decline from US$ 50,069 million in 2013 to US$ 46,970 million in 2014. Following this dip, a consistent growth trajectory was established, with total capital expanding annually to reach US$ 52,119 million by December 31, 2017, indicating an expansion of the total funding base.
- Debt to Capital Ratio Analysis
- The debt to capital ratio rose steadily from 0.40 in 2013 to 0.50 in 2015, maintaining this level through 2016. This progression signifies an increase in the proportion of debt relative to total capital. In 2017, the ratio declined to 0.46, a result of the simultaneous decrease in total debt and the increase in total capital, suggesting a slight improvement in the solvency position.
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Debt to Assets
Time Warner Inc., debt to assets calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Debt due within one year | 5,450) | 1,947) | 198) | 1,118) | 66) | |
| Long-term debt, excluding due within one year | 18,294) | 22,392) | 23,594) | 21,376) | 20,099) | |
| Total debt | 23,744) | 24,339) | 23,792) | 22,494) | 20,165) | |
| Total assets | 69,209) | 65,966) | 63,848) | 63,259) | 67,994) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.34 | 0.37 | 0.37 | 0.36 | 0.30 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Alphabet Inc. | — | — | — | — | — | |
| Comcast Corp. | — | — | — | — | — | |
| Meta Platforms Inc. | — | — | — | — | — | |
| Netflix Inc. | — | — | — | — | — | |
| Walt Disney Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 2017 Calculation
Debt to assets = Total debt ÷ Total assets
= 23,744 ÷ 69,209 = 0.34
2 Click competitor name to see calculations.
The solvency profile between 2013 and 2017 is characterized by an initial increase in leverage, a period of stabilization, and a subsequent modest improvement in the debt-to-assets relationship.
- Total Debt Trends
- Total debt experienced a consistent upward trajectory from 2013 to 2016, increasing from US$ 20,165 million to a peak of US$ 24,339 million. This growth trend reversed slightly in 2017, with total debt declining to US$ 23,744 million.
- Total Asset Fluctuations
- The total asset base showed an initial contraction, falling from US$ 67,994 million in 2013 to US$ 63,259 million in 2014. Following this decline, assets entered a period of steady recovery and growth, concluding the period at US$ 69,209 million in 2017.
- Debt to Assets Ratio Analysis
- The debt to assets ratio increased from 0.30 in 2013 to 0.36 in 2014, reflecting a higher reliance on debt relative to total assets. This ratio plateaued at 0.37 during 2015 and 2016. In 2017, the ratio declined to 0.34, indicating an improvement in solvency resulting from the concurrent reduction in total debt and the expansion of the asset base.
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Financial Leverage
Time Warner Inc., financial leverage calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 69,209) | 65,966) | 63,848) | 63,259) | 67,994) | |
| Total Time Warner Inc. shareholders’ equity | 28,375) | 24,335) | 23,619) | 24,476) | 29,904) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 2.44 | 2.71 | 2.70 | 2.58 | 2.27 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Alphabet Inc. | — | — | — | — | — | |
| Comcast Corp. | — | — | — | — | — | |
| Meta Platforms Inc. | — | — | — | — | — | |
| Netflix Inc. | — | — | — | — | — | |
| Walt Disney Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 2017 Calculation
Financial leverage = Total assets ÷ Total Time Warner Inc. shareholders’ equity
= 69,209 ÷ 28,375 = 2.44
2 Click competitor name to see calculations.
The organization's capital structure exhibited a trend of increasing financial leverage between 2013 and 2016, followed by a notable reduction in 2017. This trajectory reflects fluctuations in both the asset base and the equity position over the five-year period.
- Financial Leverage Trend
- The financial leverage ratio rose steadily from 2.27 in 2013 to a peak of 2.71 in 2016. This upward trend indicates a growing reliance on debt to finance assets relative to shareholders' equity. However, a reversal occurred in 2017, with the ratio declining to 2.44, suggesting a movement toward a more conservative capital structure.
- Shareholders' Equity Analysis
- Equity levels experienced a significant contraction from 2013 to 2015, falling from US$ 29,904 million to US$ 23,619 million. This decline was a primary driver in the increase of the leverage ratio during this period. A recovery phase followed, with equity increasing to US$ 28,375 million by the end of 2017, nearly returning to the initial 2013 levels.
- Total Asset Movement
- Total assets showed an initial decrease in 2014, dropping to US$ 63,259 million from US$ 67,994 million in 2013. Following this decline, a consistent growth pattern was observed, with assets expanding annually to reach US$ 69,209 million by December 31, 2017.
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Interest Coverage
Time Warner Inc., interest coverage calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Time Warner Inc. shareholders | 5,247) | 3,926) | 3,833) | 3,827) | 3,691) | |
| Add: Net income attributable to noncontrolling interest | (3) | (1) | (1) | —) | —) | |
| Less: Discontinued operations, net of tax | —) | 11) | 37) | (67) | 137) | |
| Add: Income tax expense | 701) | 1,281) | 1,651) | 785) | 1,749) | |
| Add: Interest expense | 1,214) | 1,388) | 1,382) | 1,353) | 1,283) | |
| Earnings before interest and tax (EBIT) | 7,159) | 6,583) | 6,828) | 6,032) | 6,586) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 5.90 | 4.74 | 4.94 | 4.46 | 5.13 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Alphabet Inc. | — | — | — | — | — | |
| Comcast Corp. | — | — | — | — | — | |
| Meta Platforms Inc. | — | — | — | — | — | |
| Netflix Inc. | — | — | — | — | — | |
| Walt Disney Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 2017 Calculation
Interest coverage = EBIT ÷ Interest expense
= 7,159 ÷ 1,214 = 5.90
2 Click competitor name to see calculations.
The solvency position regarding interest coverage remained stable between 2013 and 2017, characterized by periodic fluctuations in operational earnings and debt service costs. The overall capacity to meet interest obligations improved by the end of the period, driven by a combination of increased operational profitability and reduced financing costs.
- Earnings Before Interest and Tax (EBIT)
- Operational earnings exhibited a volatile but generally upward trajectory. After a decline from $6,586 million in 2013 to $6,032 million in 2014, EBIT recovered to $6,828 million in 2015. Despite a slight contraction to $6,583 million in 2016, the figure reached a five-year peak of $7,159 million by December 31, 2017.
- Interest Expense
- Interest costs experienced a steady increase for the first four years of the period, rising from $1,283 million in 2013 to a maximum of $1,388 million in 2016. This trend reversed sharply in 2017, with expenses dropping to $1,214 million, the lowest level observed during the analyzed timeframe.
- Interest Coverage Ratio
- The interest coverage ratio reflects the combined impact of EBIT volatility and shifting interest expenses. A contraction is observed between 2013 and 2014, where the ratio fell from 5.13 to a period low of 4.46. Subsequent years showed recovery and fluctuation, culminating in a peak ratio of 5.90 in 2017. The significant improvement in the final year is attributed to the simultaneous increase in EBIT and the reduction in total interest expenditures, thereby enhancing the margin of safety for debt servicing.
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Fixed Charge Coverage
Time Warner Inc., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Time Warner Inc. shareholders | 5,247) | 3,926) | 3,833) | 3,827) | 3,691) | |
| Add: Net income attributable to noncontrolling interest | (3) | (1) | (1) | —) | —) | |
| Less: Discontinued operations, net of tax | —) | 11) | 37) | (67) | 137) | |
| Add: Income tax expense | 701) | 1,281) | 1,651) | 785) | 1,749) | |
| Add: Interest expense | 1,214) | 1,388) | 1,382) | 1,353) | 1,283) | |
| Earnings before interest and tax (EBIT) | 7,159) | 6,583) | 6,828) | 6,032) | 6,586) | |
| Add: Rent expense, excluding sublease income | 348) | 334) | 348) | 391) | 463) | |
| Earnings before fixed charges and tax | 7,507) | 6,917) | 7,176) | 6,423) | 7,049) | |
| Interest expense | 1,214) | 1,388) | 1,382) | 1,353) | 1,283) | |
| Rent expense, excluding sublease income | 348) | 334) | 348) | 391) | 463) | |
| Fixed charges | 1,562) | 1,722) | 1,730) | 1,744) | 1,746) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 4.81 | 4.02 | 4.15 | 3.68 | 4.04 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Alphabet Inc. | — | — | — | — | — | |
| Comcast Corp. | — | — | — | — | — | |
| Meta Platforms Inc. | — | — | — | — | — | |
| Netflix Inc. | — | — | — | — | — | |
| Walt Disney Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 2017 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 7,507 ÷ 1,562 = 4.81
2 Click competitor name to see calculations.
The solvency profile exhibits a general improvement in the capacity to meet fixed financial obligations over the period from 2013 to 2017. This trajectory is characterized by a combination of fluctuating operational earnings and a consistent reduction in fixed costs.
- Fixed Charge Coverage Ratio
- The coverage ratio experienced initial volatility, declining from 4.04 in 2013 to a period low of 3.68 in 2014. Following this dip, the ratio recovered and trended upward, reaching a five-year peak of 4.81 by December 31, 2017. This increase indicates a strengthening margin of safety in the company's ability to service its fixed charges.
- Earnings Before Fixed Charges and Tax
- Earnings demonstrated a fluctuating but overall positive trend. A notable decrease occurred in 2014, where earnings fell to 6,423 million USD, but this was followed by a recovery in 2015 and 2017. The period ended with a maximum value of 7,507 million USD, suggesting an enhanced ability to generate cash flow before the application of fixed costs and taxes.
- Fixed Charges Trend
- A consistent and steady decline is observed in fixed charges over the analyzed timeframe. Costs were reduced from 1,746 million USD in 2013 to 1,562 million USD in 2017. The simultaneous increase in earnings and the reduction of these obligations drove the significant expansion of the coverage ratio in the final year of the period.
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