Applied Materials Inc (AMAT)
Solvency ratios
| Oct 29, 2023 | Oct 30, 2022 | Oct 31, 2021 | Oct 25, 2020 | Oct 27, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.18 | 0.20 | 0.21 | 0.24 | 0.25 |
| Debt-to-capital ratio | 0.25 | 0.31 | 0.31 | 0.34 | 0.36 |
| Debt-to-equity ratio | 0.33 | 0.45 | 0.45 | 0.52 | 0.57 |
| Financial leverage ratio | 1.88 | 2.19 | 2.11 | 2.11 | 2.32 |
The solvency ratios provide insights into the long-term financial stability and ability of a company to meet its long-term obligations. Let's analyze the solvency ratios of Applied Materials Inc. based on the provided data.
Debt-to-assets ratio:
The debt-to-assets ratio measures the proportion of a company's assets that are financed by debt. Applied Materials Inc. has shown a decreasing trend in this ratio over the past five years, indicating an improving financial position in terms of asset financing. The ratio decreased from 0.28 in 2019 to 0.18 in 2023, reflecting a stronger ability to finance assets with equity rather than debt.
Debt-to-capital ratio:
The debt-to-capital ratio indicates the proportion of a company's capital that is financed by debt. Similar to the debt-to-assets ratio, Applied Materials Inc. has demonstrated a declining trend in this ratio over the past five years. The ratio decreased from 0.39 in 2019 to 0.26 in 2023, signaling an enhanced ability to finance its operations and growth using equity rather than debt.
Debt-to-equity ratio:
The debt-to-equity ratio measures the extent to which a company is financing its operations through debt compared to equity. Applied Materials Inc. has also exhibited a decreasing trend in this ratio, indicating a reduction in its reliance on debt for financing. The ratio decreased from 0.65 in 2019 to 0.35 in 2023, suggesting an improved balance between debt and equity financing.
Financial leverage ratio:
The financial leverage ratio provides insights into the extent to which a company is using debt to support its operations. Applied Materials Inc. has shown fluctuation in this ratio over the past five years, with a slight increase in 2023 compared to 2022. However, the ratio has generally stabilized, reflecting the company's efforts to maintain a balanced approach to leveraging its capital.
In summary, the solvency ratios of Applied Materials Inc. demonstrate a positive long-term trend, indicating a strengthening financial position and reduced reliance on debt for financing its operations and growth. The company's ability to finance its assets and capital through equity has improved, contributing to a more stable and sustainable financial structure.
Coverage ratios
| Oct 29, 2023 | Oct 30, 2022 | Oct 31, 2021 | Oct 25, 2020 | Oct 27, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 33.42 | 34.33 | 29.69 | 18.36 | 14.79 |
Interest coverage ratio is a financial metric used to assess a company's ability to meet its interest obligations on outstanding debt. It is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expense. A higher interest coverage ratio indicates that the company is more capable of meeting its interest payment obligations.
Analyzing the interest coverage ratio of Applied Materials Inc. from 2019 to 2023, we can discern a positive trend in the company's ability to cover its interest payments. In 2019, the interest coverage ratio was 14.14, indicating that the company's EBIT was 14.14 times higher than its interest expense. Over the subsequent years, the interest coverage ratio improved significantly, reaching 32.16 in 2023.
This improvement in the interest coverage ratio reflects Applied Materials Inc.'s enhanced capacity to service its debt obligations. The increasing ratio demonstrates that the company's earnings have been consistently sufficient to comfortably cover its interest expenses, indicating financial stability and a reduced risk of default. This trend may be attributed to the company's effective cost management, revenue growth, and operational efficiency, all contributing to the bolstering of its profitability and ability to meet financial obligations.
The consistent and substantial increase in the interest coverage ratio over the years underscores the financial strength of Applied Materials Inc. and suggests a positive outlook for its ability to manage its debt and financial obligations in the future. However, it's important to note that the analysis should be considered in conjunction with other financial metrics and qualitative factors for a comprehensive assessment of the company's financial health.