Advance Auto Parts Inc (AAP)
Financial leverage ratio
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 12,276,300 | 11,986,400 | 12,194,200 | 11,839,600 | 11,248,500 |
| Total stockholders’ equity | US$ in thousands | 2,519,730 | 2,599,190 | 3,129,450 | 3,559,510 | 3,549,080 |
| Financial leverage ratio | 4.87 | 4.61 | 3.90 | 3.33 | 3.17 |
December 31, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $12,276,300K ÷ $2,519,730K
= 4.87
The financial leverage ratio of Advance Auto Parts Inc has shown a consistent increasing trend over the past five years, indicating a greater reliance on debt financing to support its operations. The ratio has increased from 3.17 in 2019 to 4.87 in 2023, reflecting a significant escalation in the company's debt levels relative to its equity.
This escalating trend in the financial leverage ratio may suggest that Advance Auto Parts Inc has been taking on a higher proportion of debt in its capital structure compared to equity. While higher leverage can potentially amplify returns for shareholders when the company performs well, it also exposes the business to increased financial risk during periods of economic downturn or industry challenges.
Investors and stakeholders should carefully monitor Advance Auto Parts Inc's ability to manage its debt levels effectively and ensure that the company can meet its debt obligations while continuing to invest in growth opportunities and maintain a strong financial position. Additionally, a high financial leverage ratio may indicate reduced financial flexibility and may impact the company's credit rating and borrowing costs in the long run.
Peer comparison
Dec 31, 2023