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.