Choice Hotels International Inc (CHH)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.45 | 0.57 | 0.44 | 0.67 | 0.61 |
| Debt-to-capital ratio | 0.97 | 0.89 | 0.76 | 1.01 | 1.03 |
| Debt-to-equity ratio | 30.02 | 7.76 | 3.17 | — | — |
| Financial leverage ratio | 67.27 | 13.59 | 7.27 | — | — |
Choice Hotels International Inc's solvency ratios indicate its ability to meet its long-term financial obligations.
1. Debt-to-assets ratio:
The trend of this ratio shows a fluctuation over the years, indicating the company's varying levels of debt relative to its total assets. The ratio decreased from 0.67 in 2020 to 0.45 in 2023, suggesting that the company has reduced its reliance on debt to finance its assets, which is a positive sign for solvency.
2. Debt-to-capital ratio:
The trend in this ratio also shows fluctuations, with a peak in 2020 at 1.01, followed by a decrease to 0.97 in 2023. This ratio represents the proportion of debt in the company's capital structure. The decrease indicates that the company's debt as a proportion of its total capital has slightly decreased, which is generally favorable for solvency.
3. Debt-to-equity ratio:
The debt-to-equity ratio has shown a significant increase from 2019 to 2023. In 2019, the company had a debt-to-equity ratio of 3.17, which increased to 30.02 in 2023. This rise may suggest that the company is relying more on debt financing compared to equity, which can increase financial risk and impact solvency negatively.
4. Financial leverage ratio:
The financial leverage ratio also depicts a substantial increase over the years, reflecting the company's increasing reliance on debt to finance its operations. The ratio increased from 7.27 in 2019 to 67.27 in 2023. High financial leverage can increase the company's financial risk and may affect its ability to meet its debt obligations in the long term.
In conclusion, while Choice Hotels International Inc has managed to reduce its debt relative to assets and capital in recent years, the significant increase in the debt-to-equity and financial leverage ratios raises concerns about its long-term solvency and financial risk profile. It is important for the company to carefully manage its debt levels to ensure sustainable financial health and stability.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 6.28 | 10.97 | 9.07 | 2.08 | 6.77 |
Choice Hotels International Inc's interest coverage ratio measures its ability to meet interest obligations on its outstanding debt. The ratio indicates the company's ability to generate operating income relative to its interest expenses.
In analyzing the trend of Choice Hotels International Inc's interest coverage from 2019 to 2023, we observe fluctuations in the ratio. The interest coverage ratio was 6.77 in 2019, indicating a moderate ability to cover interest expenses. In 2020, the ratio dropped significantly to 2.08, suggesting a decrease in the company's ability to cover interest payments with its operating income.
However, the interest coverage ratio improved in the following years, reaching 9.07 in 2021 and further increasing to 10.97 in 2022. These improvements demonstrate a strengthening ability to cover interest expenses comfortably. The interest coverage ratio peaked at 6.28 in 2023, reaffirming the company's solid performance in generating operating income relative to its interest obligations.
Overall, the trend in Choice Hotels International Inc's interest coverage ratio shows variability over the years, with fluctuations in the company's ability to cover interest expenses. Despite the fluctuations, the recent increase in the interest coverage ratio indicates a positive trend in the company's financial health and ability to service its debt.