DR Horton Inc (DHI)

Financial leverage ratio

		Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Total assets	US$ in thousands	32,582,400	30,351,100	24,015,900	18,912,300	15,606,600
Total stockholders’ equity	US$ in thousands	22,696,200	19,396,300	14,886,500	11,840,000	10,020,900
Financial leverage ratio		1.44	1.56	1.61	1.60	1.56

September 30, 2023 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $32,582,400K ÷ $22,696,200K
= 1.44

The financial leverage ratio, also known as the debt-to-equity ratio, measures the extent to which a company is using debt to finance its operations compared to its equity. A higher ratio indicates higher financial leverage and greater reliance on debt financing.

Looking at D.R. Horton Inc.'s financial leverage ratio over the past five years, we observe a decreasing trend from 1.56 in 2019 to 1.44 in 2023. This implies a reduction in the company's reliance on debt as a source of financing relative to equity.

A financial leverage ratio of 1.44 in 2023 indicates that for every dollar of equity, the company has $1.44 of debt. This level of financial leverage, while lower than in previous years, still suggests that D.R. Horton Inc. is moderately leveraged.

A lower financial leverage ratio can be advantageous as it signifies a lower risk of financial distress due to a reduced reliance on debt. However, it's important to note that excessively low leverage ratios can also signal underutilization of debt, potentially leading to missed opportunities for leveraging the company's capital structure for growth and investment.

Overall, the decreasing trend in D.R. Horton Inc.'s financial leverage ratio from 2021 to 2023 reflects a potential effort to reduce reliance on debt financing, which could indicate a strategic shift towards a more conservative capital structure. This can be viewed positively in terms of financial risk management and resilience, although it may also suggest a more conservative approach to growth and investment.