Apple Inc (AAPL)
Solvency ratios
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.27 | 0.28 | 0.31 | 0.30 | 0.27 |
| Debt-to-capital ratio | 0.61 | 0.66 | 0.63 | 0.60 | 0.50 |
| Debt-to-equity ratio | 1.53 | 1.95 | 1.73 | 1.51 | 1.01 |
| Financial leverage ratio | 5.67 | 6.96 | 5.56 | 4.96 | 3.74 |
The solvency ratios provide insights into a company's ability to meet its long-term financial obligations and the extent to which it relies on debt to finance its operations. Let's analyze the solvency ratios of Apple Inc based on the provided data.
1. Debt-to-assets ratio:
The debt-to-assets ratio measures the proportion of a company's assets financed by debt. A lower ratio indicates lower reliance on debt for asset financing. Apple Inc's debt-to-assets ratio has generally decreased over the past five years, indicating a reduced reliance on debt to finance its assets. This trend suggests that Apple has been managing its debt levels effectively relative to its total assets.
2. Debt-to-capital ratio:
The debt-to-capital ratio compares a company's total debt to its total capital (debt and equity), providing an indication of the proportion of capital that comes from debt financing. Apple Inc's debt-to-capital ratio has shown fluctuations over the years but has generally increased, indicating a higher reliance on debt in its capital structure. This increase could suggest that Apple has taken on more debt relative to its total capital, potentially affecting its financial risk.
3. Debt-to-equity ratio:
The debt-to-equity ratio measures the extent to which a company is financed by debt relative to shareholders' equity. A higher ratio implies higher financial risk due to an increased reliance on debt financing. Apple Inc's debt-to-equity ratio has shown fluctuations but has generally increased over the past five years. This trend indicates that Apple has increased its reliance on debt financing relative to shareholder equity, potentially increasing its financial risk and leverage.
4. Financial leverage ratio:
The financial leverage ratio compares a company's total assets to its equity, providing an indication of the extent to which a company relies on debt financing. A higher ratio indicates a greater reliance on debt. Apple Inc's financial leverage ratio has consistently increased over the past five years. This increase suggests that Apple has been relying more on debt to finance its assets, leading to higher financial leverage and potential risk.
In summary, Apple Inc's solvency ratios indicate a mixed picture. While the debt-to-assets ratio has improved, suggesting effective management of debt relative to assets, the other ratios such as debt-to-capital, debt-to-equity, and financial leverage ratios have shown increasing reliance on debt financing. This could potentially increase Apple's financial risk and leverage, and it is important for stakeholders to monitor these trends closely.
Coverage ratios
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 29.92 | 41.64 | 42.29 | 24.35 | 19.38 |
The interest coverage ratio measures a company's ability to cover its interest expenses with its operating income. A higher ratio indicates a greater ability to meet interest obligations. Looking at the interest coverage ratios for Apple Inc over the past five years, we observe a generally strong and improving trend.
In 2019, the interest coverage ratio stood at 17.88, indicating that Apple's operating income was 17.88 times its interest expense. This suggests a healthy margin of safety in meeting interest obligations. Over the next two years, the interest coverage ratio continued to climb, reaching 41.19 in 2021, demonstrating a significant improvement in the company's ability to cover its interest expenses.
However, in 2022 and 2023, a slight decline in the interest coverage ratio was observed, falling to 40.75 and 29.06 respectively. While these ratios are still relatively high and indicate a strong ability to meet interest payments, the declining trend may warrant further investigation to understand the factors driving this change.
In conclusion, Apple Inc's interest coverage ratio has generally shown a positive trend over the past five years, indicating the company's ability to comfortably cover its interest expenses. However, the recent slight decline in the ratio should be monitored to ensure that it does not signify any underlying concerns regarding the company's financial health and ability to service its debt.