The Clorox Company (CLX)

The solvency ratios for The Clorox Company, as of the provided data, indicate a notably conservative capital structure with respect to long-term debt, while offering insights into the company's financial leverage over the specified period.

Firstly, the debt-to-assets ratio, debt-to-capital ratio, and debt-to-equity ratio are all consistently reported as zero across all dates from June 30, 2021, through June 30, 2025. This uniformity suggests that The Clorox Company maintains an entirely equity-financed capital structure, with negligible or no long-term debt liabilities during this period. Such a stance reflects a conservative approach to leverage, minimizing financial risk related to leverage-induced insolvency.

In contrast, the financial leverage ratio presents substantive variation over the years. It starts at 15.41 in June 2021, declines to 11.08 in June 2022, then sharply increases to 27.02 in June 2023, followed by decreases to 17.53 in June 2024 and 17.32 in June 2025. The high initial and peak values in 2023 suggest periods when the company's equity base was relatively low compared to its assets, implying a temporary increase in leverage or asset base growth relative to shareholders’ equity. The subsequent reduction indicates a possible improvement in equity position or asset management, aligning the leverage ratio closer to safer levels.

Overall, the data indicates that The Clorox Company has maintained a debt-free or virtually debt-free capital structure during the period analyzed, with fluctuations in financial leverage ratios likely driven by asset management or equity changes. The absence of debt-related ratios confirms a strong solvency position with minimal reliance on borrowed funds, positioning the company as financially stable and resilient to insolvency risks, albeit potentially at the expense of leveraging growth opportunities.

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Coverage ratios

The interest coverage ratio of The Clorox Company has exhibited significant fluctuations over the specified period from June 30, 2021, to June 30, 2025. As of June 30, 2021, the company demonstrated a robust interest coverage ratio of 10.03, indicating that its earnings before interest and taxes (EBIT) were more than ten times its interest expense, reflecting strong capacity to meet interest obligations. By June 30, 2022, this ratio declined notably to 6.64, suggesting a reduction in earnings relative to interest expenses but still maintaining comfortable coverage.

The subsequent year, June 30, 2023, saw a further decrease in the ratio to 3.79, approaching a more moderate level and implying increased difficulty in covering interest expenses solely with earnings. The trend continued into June 30, 2024, with the ratio increasing again to 5.57, indicating some recovery in the company's ability to meet its interest obligations. However, by June 30, 2025, the ratio falls to zero, which potentially signifies that the company either reported no earnings before interest and taxes, or that interest expense exceeded earnings, rendering the coverage effectively non-existent or undefined.

Overall, the data depict a period of considerable volatility in Clorox's interest coverage, with a significant decline over time and a concerning point at the end of the period where the ratio reaches zero. This trend warrants further analysis to assess underlying causes, such as operational challenges, increased debt levels, or changes in profit margins, which could impact the company's long-term financial stability and its ability to service debt obligations.