Copart Inc (CPRT)

Financial leverage ratio

		Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019
Total assets	US$ in thousands	6,737,880	5,308,860	4,562,140	3,455,260	2,547,620
Total stockholders’ equity	US$ in thousands	5,987,440	4,625,600	3,529,200	2,489,520	1,778,380
Financial leverage ratio		1.13	1.15	1.29	1.39	1.43

July 31, 2023 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $6,737,880K ÷ $5,987,440K
= 1.13

The financial leverage ratio measures the extent to which a company is using borrowed funds to finance its assets. A higher ratio indicates a greater reliance on debt financing, while a lower ratio suggests a more conservative approach.

In the case of Copart, Inc., the trend of its financial leverage ratio over the last five years shows a decreasing pattern, from 1.43 in 2019 to 1.13 in 2023. This indicates that the company has been progressively reducing its reliance on debt to finance its operations and assets.

A decreasing financial leverage ratio can suggest improved financial stability and reduced financial risk, as the company is relying less on debt to support its operations and is potentially in a better position to weather economic downturns or fluctuations in interest rates. However, it's important to note that a low financial leverage ratio can also imply a missed opportunity to leverage debt for potential growth and expansion, as debt can be a cost-effective source of capital under certain circumstances.

Overall, Copart's declining financial leverage ratio indicates a strategic shift towards a more conservative and potentially less risky capital structure.