AAR Corp (AIR)
Financial leverage ratio
| May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 2,844,600 | 2,770,000 | 1,833,100 | 1,573,900 | 1,539,700 |
| Total stockholders’ equity | US$ in thousands | 1,211,600 | 1,189,800 | 1,099,100 | 1,034,500 | 974,400 |
| Financial leverage ratio | 2.35 | 2.33 | 1.67 | 1.52 | 1.58 |
May 31, 2025 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $2,844,600K ÷ $1,211,600K
= 2.35
The financial leverage ratio of AAR Corp has exhibited notable fluctuations over the analyzed period from May 2021 to May 2025. As of May 31, 2021, the ratio stood at 1.58, indicating a moderate level of debt relative to equity. This ratio slightly declined to 1.52 by May 31, 2022, suggesting a marginal reduction in leverage or a possible increase in equity or decrease in debt levels during that year.
However, the leverage ratio experienced a significant increase by May 31, 2023, reaching 1.67. This upward trend continued markedly in subsequent years, with the ratio reaching 2.33 by May 31, 2024, and marginally increasing to 2.35 by May 31, 2025. The sharp rise from 1.67 to over 2.3 indicates that the company has been increasingly relying on debt financing relative to equity in recent years.
The upward trajectory in the financial leverage ratio suggests an enhanced use of debt to finance assets, which could be driven by strategic expansion, acquisition activities, or refinancing of existing liabilities. While increased leverage can amplify returns on equity during favorable periods, it also elevates financial risk, potentially affecting the company's resilience during downturns. The notable escalation in leverage ratio beneath the 2024-2025 period emphasizes a shift toward more aggressive leverage management.
Overall, the trend reflects a move from relatively moderate leverage levels in 2021 and 2022 toward a heightened reliance on borrowed funds in the subsequent years. This shift warrants close monitoring as it could impact the company's financial stability and cost of capital moving forward.
Peer comparison
May 31, 2025