Acuity Brands Inc (AYI)
Financial leverage ratio
| Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | Aug 31, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 3,408,500 | 3,480,200 | 3,575,100 | 3,491,700 | 3,172,400 |
| Total stockholders’ equity | US$ in thousands | 2,015,400 | 1,911,800 | 2,044,500 | 2,127,500 | 1,918,900 |
| Financial leverage ratio | 1.69 | 1.82 | 1.75 | 1.64 | 1.65 |
August 31, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $3,408,500K ÷ $2,015,400K
= 1.69
The financial leverage ratio measures the extent to which a company's operations are funded by equity versus debt. A higher ratio indicates a greater reliance on debt to finance operations, while a lower ratio suggests a stronger equity position. Let's analyze Acuity Brands, Inc.'s financial leverage ratio based on the provided data.
The financial leverage ratio for Acuity Brands, Inc. has fluctuated over the last five years. In 2023, the ratio stands at 1.69, indicating that the company's assets are financed with approximately 1.69 times more debt than equity. This represents a decrease from the previous year, where the ratio was 1.82.
The decrease in the financial leverage ratio from 2022 to 2023 suggests that the company may have reduced its reliance on debt to finance its operations. This could indicate a prudent financial strategy aimed at reducing financial risk and enhancing the company's long-term financial stability.
Comparing the 2023 ratio to earlier years, we observe that the financial leverage ratio was higher in 2021 at 1.75 and in 2020 at 1.64, but slightly lower than 2019, where it was 1.65. This fluctuation indicates that Acuity Brands, Inc. has actively managed its capital structure over the years, adjusting the balance between debt and equity financing.
The declining trend in the financial leverage ratio from 2022 to 2023 suggests a potential improvement in the company's financial risk profile. However, it's important to note that a lower financial leverage ratio does not necessarily indicate a stronger financial position, as the optimal capital structure varies by industry and company circumstances.
In conclusion, Acuity Brands, Inc.'s financial leverage ratio has shown fluctuations over the years, with a decrease in 2023, suggesting a potential reduction in reliance on debt financing. This trend indicates a strategic shift in the company's capital structure, which could impact its financial risk and solvency.
Peer comparison
Aug 31, 2023