ABM Industries Incorporated (ABM)
Financial leverage ratio
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 4,933,700 | 4,868,900 | 4,436,200 | 3,776,900 | 3,692,600 |
| Total stockholders’ equity | US$ in thousands | 1,799,900 | 1,717,200 | 1,609,200 | 1,500,300 | 1,542,000 |
| Financial leverage ratio | 2.74 | 2.84 | 2.76 | 2.52 | 2.39 |
October 31, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $4,933,700K ÷ $1,799,900K
= 2.74
The financial leverage ratio measures the extent to which a company relies on debt to finance its assets. It is calculated as total assets divided by total equity.
Looking at the trend of ABM Industries Inc.'s financial leverage ratio over the past five years, we can see that the ratio has been fluctuating. In 2019, the ratio was relatively low at 2.39, indicating a lower level of financial leverage. However, from 2020 to 2022, the ratio increased steadily, reaching a peak of 2.84 in 2022. This indicates that the company's reliance on debt to finance its assets increased during this period.
In 2023, the financial leverage ratio declined slightly to 2.74, but it still remains relatively high compared to 2019. This suggests that ABM Industries Inc. has maintained a relatively high level of financial leverage in its capital structure.
A higher financial leverage ratio generally signifies higher financial risk, as it means the company has a larger proportion of debt in its capital structure compared to equity. This can lead to higher interest expenses and potential solvency issues if the company is unable to meet its debt obligations.
It's important to note that while a high financial leverage ratio can amplify returns on equity when the company is performing well, it also magnifies losses in times of poor performance. Therefore, investors and stakeholders should closely monitor the company's ability to manage its debt and the overall stability of its capital structure.
Peer comparison
Oct 31, 2023