Cars.com Inc (CARS)

Financial leverage ratio

		Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Total assets	US$ in thousands	1,172,450	1,103,190	1,085,540	1,002,220	1,024,870	1,050,170	1,051,460	1,069,220	1,007,200	998,127	1,020,880	1,035,810	1,075,710	1,068,450	1,077,640	1,255,920	2,027,990	2,059,880	2,527,390	2,580,270
Total stockholders’ equity	US$ in thousands	492,108	483,010	477,457	384,987	384,430	376,527	391,388	396,087	398,020	394,574	385,456	374,016	368,190	322,373	328,781	347,890	1,141,070	1,141,480	1,569,150	1,592,670
Financial leverage ratio		2.38	2.28	2.27	2.60	2.67	2.79	2.69	2.70	2.53	2.53	2.65	2.77	2.92	3.31	3.28	3.61	1.78	1.80	1.61	1.62

December 31, 2023 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $1,172,450K ÷ $492,108K
= 2.38

The financial leverage ratio of Cars.com has been fluctuating over the past eight quarters, ranging from a low of 2.27 in Q2 2023 to a high of 2.79 in Q3 2022. This ratio indicates that, on average, the company has been using debt in its capital structure to a significant extent.

A high financial leverage ratio suggests that Cars.com relies more on debt financing rather than equity, which can amplify returns on equity when business is booming but also increase the risk of financial distress during economic downturns or periods of high interest rates. The decreasing trend from Q3 2022 to Q2 2023 indicates a reduction in leverage, which could be a positive sign in terms of reducing financial risk and improving the company's financial health.

However, the ratio increased in the most recent quarter, Q1 2023, to 2.60, which may suggest that the company has taken on additional debt or experienced a decline in equity. It would be important to further investigate the reasons behind this change in leverage and assess its potential impact on the company's overall financial stability and future performance.