Arrow Electronics Inc (ARW)

Arrow Electronics Inc's solvency ratios provide insight into the company's ability to meet its long-term financial obligations and assess its financial risk.

- The debt-to-assets ratio decreased from 0.12 in 2020 to 0.11 in 2021 before increasing to 0.15 in 2022 and then fluctuating between 0.10 and 0.13 in the subsequent years. This ratio indicates that a relatively low percentage of the company's assets are financed by debt.

- The debt-to-capital ratio followed a similar pattern, starting at 0.29 in 2020, increasing to 0.30 in 2021, peaking at 0.36 in 2022, and then fluctuating between 0.27 and 0.32 in the following years. This ratio shows the proportion of the company's capital that comes from debt, with higher ratios indicating higher financial leverage.

- The debt-to-equity ratio shows the company's reliance on borrowing compared to equity. It started at 0.41 in 2020, increased to 0.42 in 2021, spiked to 0.57 in 2022, and fluctuated between 0.37 and 0.48 in the subsequent years. A lower ratio indicates less reliance on debt financing.

- The financial leverage ratio represents the company's use of debt to fund operations and growth. Arrow Electronics' financial leverage ratio increased from 3.35 in 2020 to 3.92 in 2022 before stabilizing around 3.70 to 3.78 in the following years. A higher financial leverage ratio suggests higher financial risk and greater dependence on debt.

Overall, Arrow Electronics Inc's solvency ratios indicate a mix of debt and equity financing with fluctuations over the years, suggesting variations in the company's capital structure and financial risk levels.

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Coverage ratios

Arrow Electronics Inc's interest coverage ratio has shown fluctuation over the past five years. In 2020, the interest coverage ratio was 6.52, indicating that the company generated 6.52 times the amount needed to cover its interest expenses. This ratio improved significantly in 2021, reaching 11.82, and remained relatively strong at 11.14 in 2022. However, there was a notable decline in 2023, with the interest coverage ratio dropping to 4.48 and falling further to 2.85 in 2024.

A higher interest coverage ratio is generally seen as a positive indicator of a company's ability to meet its interest obligations. The significant increase in 2021 reflects an improvement in Arrow Electronics Inc's ability to cover its interest expenses, potentially due to increased profitability or lower interest costs. However, the subsequent decline in the following years raises concerns about the company's ability to comfortably manage its interest payments from its operating income.

It is crucial for Arrow Electronics Inc to closely monitor its interest coverage ratio and take appropriate measures to strengthen its financial position and ensure stability in meeting its interest obligations in the future. Regular evaluation of the company's financial health and consideration of factors affecting profitability and interest expenses will be essential for maintaining a sustainable interest coverage ratio over time.