The Clorox Company (CLX)

The solvency ratios of The Clorox Company indicate its ability to meet its long-term financial obligations.

1. Debt-to-assets ratio: This ratio has increased from 0.39 in 2021 to 0.43 in 2024. The increase suggests that the company's proportion of debt in relation to its total assets has slightly increased over the years.

2. Debt-to-capital ratio: The ratio fluctuated between 0.75 in 2020 and 0.92 in 2023, with a decrease to 0.88 in 2024. A lower ratio indicates that the company relies less on debt to finance its operations.

3. Debt-to-equity ratio: The ratio ranged from 3.06 in 2020 to 11.26 in 2023, with a notable decrease to 7.56 in 2024. A higher ratio signifies a higher level of financial risk and leverage on equity, which has been somewhat reduced in 2024.

4. Financial leverage ratio: This ratio has also fluctuated significantly, from 6.84 in 2020 to 27.02 in 2022, and has decreased to 17.53 in 2024. A higher financial leverage ratio indicates a higher level of financial risk due to the company's reliance on debt financing.

In summary, based on the solvency ratios, The Clorox Company has shown some fluctuations in its debt levels and leverage over the years. While the company has managed to reduce certain debt ratios in 2024 compared to previous years, there are still areas where further improvement may be needed to enhance its long-term solvency and financial stability.

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Coverage ratios

The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt with its operating income. A higher interest coverage ratio indicates a company is more capable of servicing its debt.

Looking at The Clorox Company's interest coverage over the past five years, there has been a declining trend. In Jun 30, 2020, the interest coverage ratio was 12.97, indicating a strong ability to cover interest expenses. However, this ratio decreased to 10.00 in Jun 30, 2021, and further dropped to 6.64 in Jun 30, 2022. The most recent interest coverage ratio for Jun 30, 2024, stands at 5.29.

A declining interest coverage ratio may raise concerns about the company's ability to meet its interest obligations in the future, especially if the trend continues. It suggests that the company's operating income may be becoming less sufficient to cover its interest expenses. Investors and creditors may view this trend as a potential risk, as a lower interest coverage ratio could indicate a higher chance of default on debt payments.

It would be important for stakeholders and management of The Clorox Company to closely monitor the trend in interest coverage and take necessary steps to improve the company's ability to cover its interest expenses, such as enhancing profitability, reducing debt levels, or refinancing debt at more favorable terms.