Air Products and Chemicals Inc (APD)

Financial leverage ratio

		Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Total assets	US$ in thousands	32,002,500	27,192,600	26,859,200	25,168,500	18,942,800
Total stockholders’ equity	US$ in thousands	14,312,900	13,144,000	13,539,700	12,079,800	11,053,600
Financial leverage ratio		2.24	2.07	1.98	2.08	1.71

September 30, 2023 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $32,002,500K ÷ $14,312,900K
= 2.24

The financial leverage ratio, also known as the debt-to-equity ratio, provides insight into the proportion of a company's financing that comes from debt compared to equity. In the case of Air Products & Chemicals Inc., the trend of the financial leverage ratio over the past five years can offer valuable insights into the company's capital structure and its ability to manage debt.

In 2023, the financial leverage ratio for Air Products & Chemicals Inc. stands at 2.24, indicating that the company's leverage has increased compared to the previous year. This suggests that the company is relying more on debt financing relative to equity. The higher the ratio, the greater the company's reliance on debt to fund its operations and growth. It's important to note that high leverage can amplify returns on equity when business is booming, but it also increases the risk of insolvency during economic downturns.

When comparing this to the previous years, we observe a consistent trend. The financial leverage ratio has been rising steadily over the past five years, signaling an increasing reliance on debt to finance its operations and investments. The ratio was 2.07 in 2022, 1.98 in 2021, 2.08 in 2020, and 1.71 in 2019. This suggests a deliberate strategy by the company to utilize debt to fuel its growth and expansion plans.

It's essential to critically assess the reasons behind the increase in leverage. While debt can provide access to additional capital for investment and growth, it also comes with interest payments and potential risks, especially in economically uncertain times. Investors and stakeholders may closely monitor the trend in financial leverage to ensure that the company's debt levels are sustainable and aligned with its long-term growth strategy.

In conclusion, the increasing trend in Air Products & Chemicals Inc.'s financial leverage ratio over the past five years indicates a growing reliance on debt as part of its capital structure. While this can provide opportunities for expansion, it also poses increased financial risk that warrants careful consideration and monitoring.