Digi International Inc (DGII)

Based on the solvency ratios of Digi International, Inc. for the past five years, we can analyze the company's ability to meet its long-term financial obligations and assess its financial risk.

Debt-to-assets ratio:
The debt-to-assets ratio measures the proportion of a company's assets that are financed by debt. A lower ratio indicates lower financial risk. Digi International's debt-to-assets ratio has generally been low and stable, ranging from 0.00 in 2019 to 0.28 in 2022 and improving to 0.24 in 2023. This indicates that the company relies less on debt financing to support its assets, which is a positive indicator of solvency.

Debt-to-capital ratio:
The debt-to-capital ratio compares a company's total debt to its total capital (debt and equity). A lower ratio suggests a lower financial risk. Digi International's debt-to-capital ratio has also shown a decreasing trend, dropping from 0.00 in 2019 to 0.32 in 2022 and improving to 0.27 in 2023. This indicates that the company's capital structure involves less debt relative to its total capital, which is a positive sign for solvency.

Debt-to-equity ratio:
The debt-to-equity ratio measures the proportion of financing provided by creditors relative to that provided by shareholders. A lower ratio implies lower financial risk. Digi International's debt-to-equity ratio has decreased steadily over the years, from 0.00 in 2019 to 0.47 in 2022, and then improving to 0.38 in 2023. This suggests that the company has been reducing its reliance on debt financing in relation to equity, which is a favorable indication of solvency.

Financial leverage ratio:
The financial leverage ratio compares a company's total assets to its equity. A higher ratio can indicate higher financial risk. Digi International's financial leverage ratio has been increasing over time, from 1.14 in 2019 to 1.70 in 2022, but then improved to 1.55 in 2023. This may suggest increased reliance on debt financing as a source of capital and indicates a higher level of financial risk.

In summary, Digi International has generally maintained a low and improving level of debt relative to assets, capital, and equity, indicating a lower risk of insolvency. However, the increasing trend in the financial leverage ratio suggests a potential increase in financial risk associated with higher reliance on debt financing. It is important for investors and stakeholders to monitor this trend closely to ensure the company's long-term financial health.

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Coverage ratios

The interest coverage ratio is a measure of a company's ability to meet its interest payments on outstanding debt. It is calculated by dividing the earnings before interest and taxes (EBIT) by the interest expense. A higher interest coverage ratio indicates a greater ability to meet interest obligations.

Looking at the interest coverage ratios of Digi International, Inc. over the past five years, we can see some fluctuations. In 2023, the interest coverage ratio was 1.99, which indicates that the company generated almost twice as much operating income as it needed to cover its interest expenses. This is a positive sign, as it shows the company's ability to comfortably meet its interest payments from its operational earnings.

In 2022, the interest coverage ratio decreased to 1.64, indicating a slight decline in the company's ability to cover interest expenses from operating income. While the ratio is still above 1, which generally indicates that the company is capable of meeting its interest obligations, the decrease raises some concerns about the company's ability to generate sufficient earnings to cover its interest costs.

The interest coverage ratio was notably high in 2021 at 8.32, which suggests a strong ability to cover interest expenses. This indicates that the company's earnings were significantly higher compared to its interest costs, reflecting a healthy financial position in that year.

In 2020, the interest coverage ratio was 3.48, again showing a favorable ability to cover interest expenses. This suggests that the company's operational earnings were more than three times the amount needed to fulfill its interest payments, indicating financial strength during that period.

There is no data available for 2019, so we can't compare the trend for that year. However, based on the available data, the interest coverage ratio has shown some fluctuations, which may reflect changes in the company's financial performance and its ability to meet interest obligations.

Overall, the trend in Digi International, Inc.'s interest coverage ratio indicates fluctuations in its ability to cover interest expenses over the past few years. It is important for investors and creditors to monitor this ratio to assess the company's financial health and its ability to service its debt.