Alpha and Omega Semiconductor Ltd (AOSL)

The analysis of Alpha and Omega Semiconductor Ltd's solvency ratios over the period indicates a consistent financial profile characterized by minimal to zero leverage from the standpoint of debt utilization. Specifically, the debt-to-assets ratio, debt-to-capital ratio, and debt-to-equity ratio all uniformly exhibit a value of zero at each reporting date from September 30, 2020, through June 30, 2025. This suggests that the company maintains no recorded short-term or long-term borrowings relative to its assets, capital, or equity during this time frame.

Complementing these observations, the financial leverage ratio, which measures the extent of financial leverage relative to equity, demonstrates a decreasing trend over the analyzed period. Initially, this ratio was notably higher, recorded at approximately 2.63 in September 2020, but it gradually declined to approximately 1.26 as of June 2025. This decline indicates a reduction in the use of debt financing relative to equity and a possible shift towards a more conservative capital structure.

Overall, the absence of leverage ratios related to debt suggests that Alpha and Omega Semiconductor Ltd has operated without debt obligations within the period analyzed, emphasizing a fully equity-funded structure. Concurrently, the declining financial leverage ratio indicates a move towards lower financial risk and enhanced solvency robustness. This positioning enhances the company's capacity to withstand financial distress and signals prudent financial management aimed at preserving or strengthening its solvency position over time.

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Coverage ratios

The interest coverage ratio of Alpha and Omega Semiconductor Ltd has experienced significant fluctuations over the observed period. As of September 30, 2020, the ratio was negative at -0.81, indicating that the company's earnings before interest and taxes (EBIT) were insufficient to cover its interest expenses, reflecting a challenging financial position at that point.

Subsequently, the ratio improved markedly, reaching 4.06 by December 31, 2020, and continued to strengthen through to June 30, 2021, peaking notably at 26.00 on June 30, 2022. During this period, the company demonstrated a strong capacity to meet its interest obligations, with ratios consistently well above 10, indicative of robust financial health and income-generating capacity relative to interest expenses.

From September 30, 2021, through December 31, 2022, the interest coverage ratio remained high, at 14.32 and 37.62 respectively, reaffirming the company's improved ability to service interest obligations. However, a decline commenced thereafter; by March 31, 2023, the ratio had decreased to 19.65, and further to 7.21 by September 30, 2023. This downward trend suggests a reduction in EBIT relative to interest expenses, implying increased financial strain or decreased profitability.

The ratio turned negative again post-December 2023, with figures such as -2.80 in December 2023, -1.92 in June 2024, and continuing into negative territory through March 2025, reaching -6.01. These negative values indicate that the company's EBIT was insufficient to cover interest expenses during these periods, signaling potential difficulties in meeting debt obligations and a deterioration in financial stability.

Overall, the interest coverage ratio illustrates a history of substantial variability, from weak coverage in early 2020 to periods of strong coverage during 2021 and mid-2022, followed by a visible decline into negative territory from late 2023 onward. The trend suggests increasing financial stress, with the company's ability to generate sufficient earnings to cover interest expenses diminishing significantly over the more recent periods.