Alpha and Omega Semiconductor Ltd (AOSL)

The analysis of Alpha and Omega Semiconductor Ltd’s solvency ratios over the period from June 30, 2021, to June 30, 2025, reveals a distinctive financial profile characterized primarily by a consistent absence of leverage through debt. The debt-to-assets, debt-to-capital, and debt-to-equity ratios remain at zero across all reported dates, indicating that the company has not engaged in any debt financing and relies solely on equity for its capital structure. This situation suggests a conservative approach to financing, minimizing insolvency risk associated with indebtedness.

Conversely, the financial leverage ratio demonstrates a declining trend over the same period, decreasing from 2.46 in June 2021 to 1.26 in June 2025. Despite this reduction, the ratio remains above 1 throughout, implying that the company’s total assets are consistently more than double its equity base. The decrease in the ratio could result from either an increase in equity or a reduction in assets attributable to operational changes or strategic shifts.

Overall, the company exhibits a highly conservative financial stance with no reliance on leverage, which enhances its solvency profile by eliminating the risks associated with liabilities. The declining financial leverage ratio indicates an improvement in the leverage position, albeit from a base where no debt was present. This profile suggests a stable financial position with minimal insolvency risk, given the absence of external debt obligations.

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Coverage ratios

The interest coverage ratios of Alpha and Omega Semiconductor Ltd over the specified periods reveal notable fluctuations with implications for the company's financial health. As of June 30, 2021, the company demonstrated a strong ability to meet its interest obligations, with a ratio of 10.16, indicating earnings before interest and taxes (EBIT) were over ten times the interest expenses. This robust coverage improved significantly by June 30, 2022, reaching a peak of 26.03, further underscoring a period of exceptional profitability relative to interest commitments.

However, the ratio declined modestly to 20.73 as of June 30, 2023, still reflecting a comfortable margin of safety. A considerable deterioration is observed in the subsequent period, with the ratio turning negative to -3.17 on June 30, 2024, suggesting that EBIT was insufficient to cover interest expenses, possibly implying negative earnings or extraordinary expenses surpassing operational profits. This trend continued into June 30, 2025, with the ratio worsening further to -10.78, emphasizing escalating difficulty in covering interest obligations solely from earnings.

The progression from strong coverage to negative ratios indicates a significant decline in profitability and operational performance, raising concerns about the company's ability to service its debt through earnings alone. If this trend persists, it may lead to increased financial strain, potential default risks, and a need for strategic adjustments to restore interest coverage capacity.