Ciena Corp (CIEN)
Financial leverage ratio
| Oct 28, 2023 | Oct 29, 2022 | Oct 30, 2021 | Oct 31, 2020 | Oct 31, 2017 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 5,601,500 | 5,069,630 | 4,865,230 | 4,180,920 | 3,951,710 |
| Total stockholders’ equity | US$ in thousands | 2,848,360 | 2,712,860 | 3,020,020 | 2,509,600 | 2,136,340 |
| Financial leverage ratio | 1.97 | 1.87 | 1.61 | 1.67 | 1.85 |
October 28, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $5,601,500K ÷ $2,848,360K
= 1.97
The financial leverage ratio, also known as the debt-to-equity ratio, measures the proportion of a company's funding that comes from debt compared to equity. A higher financial leverage ratio indicates that a company is more reliant on debt to finance its operations, while a lower ratio suggests a greater reliance on equity.
CIENA Corp.'s financial leverage ratio has fluctuated over the past five years, as shown in the table below:
- Oct 28, 2023: 1.97
- Oct 29, 2022: 1.87
- Oct 30, 2021: 1.61
- Oct 31, 2020: 1.67
- Oct 31, 2019: 1.79
The upward trend in the financial leverage ratio from 2019 to 2023 indicates an increasing reliance on debt relative to equity to finance the company's operations. Generally, a rising financial leverage ratio could suggest a higher level of financial risk, as the company may face challenges in meeting its debt obligations, especially in economic downturns or adverse operating conditions.
It is important to note that while a high financial leverage ratio may magnify returns on equity in favorable conditions, it also exposes the company to greater risk and higher interest expenses. This can directly impact the company's profitability and financial stability. Furthermore, a significantly high ratio may also raise concerns among investors and creditors regarding the company's ability to service its debt obligations.
Considering CIENA Corp.'s increasing financial leverage ratio over the years, stakeholders should closely monitor the company's ability to manage its debt effectively and maintain sustainable financial stability. Additionally, assessing the company's overall financial health, liquidity position, and cash flow management will provide valuable insights into its ability to withstand potential financial challenges associated with higher leverage.
Peer comparison
Oct 28, 2023