Dorman Products Inc (DORM)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.20 | 0.21 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.29 | 0.32 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 0.40 | 0.46 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 1.96 | 2.25 | 1.79 | 1.43 | 1.35 |
Solvency ratios are essential in assessing a company's ability to meet its long-term obligations. Looking at the solvency ratios of Dorman Products Inc over the past five years, we can see a trend of improving financial leverage and debt management.
The debt-to-assets ratio has shown a mixed pattern, increasing from 2019 to 2022 but improving in 2023. This ratio indicates the proportion of total assets financed by debt, with lower values generally considered favorable. Dorman Products Inc has effectively reduced its reliance on debt to finance its assets over the years.
Similarly, the debt-to-capital and debt-to-equity ratios reflect the company's debt structure. Both ratios have consistently decreased from 2019 to 2023, indicating a reduced level of financial risk and a stronger capital position. A lower debt-to-capital ratio signifies less dependence on borrowed funds for overall capital, while a lower debt-to-equity ratio reflects a lower debt component relative to shareholder equity.
The financial leverage ratio, which measures the extent to which a company uses debt to finance its operations, has also shown a decreasing trend over the years. This indicates that Dorman Products Inc has been gradually reducing its reliance on debt to fund its operations and investments, resulting in a more stable and less leveraged capital structure.
Overall, the declining trend in these solvency ratios suggests that Dorman Products Inc has been effectively managing its debt levels, improving its financial stability, and enhancing its long-term solvency. Investors and stakeholders can view these trends positively as indicators of the company's financial health and capacity to meet its future obligations.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 4.51 | 11.02 | 79.52 | 227.60 | 459.04 |
Interest coverage is an important financial ratio that indicates a company's ability to meet interest payments on its debt obligations. A higher interest coverage ratio signifies that the company is more capable of servicing its debt.
Looking at the historical trend for Dorman Products Inc, we observe a significant decline in the interest coverage ratio from 2021 to 2023. In 2021, the interest coverage ratio was very high at 79.35, indicating a strong ability to cover interest expenses. However, this ratio decreased to 10.98 in 2022 and further dropped to 4.47 in 2023. This declining trend raises concerns about the company's ability to cover its interest payments comfortably in recent years.
The absence of interest coverage data for 2020 and 2019 makes it challenging to analyze the consistency or pattern of the company's interest coverage over a longer period. However, the sharp decrease in the ratio in recent years suggests that Dorman Products Inc may have experienced challenges in generating sufficient earnings to cover its interest expenses efficiently.
Overall, the declining trend in the interest coverage ratio for Dorman Products Inc from 2021 to 2023 signifies a potential strain on the company's ability to meet its interest obligations, emphasizing the importance of closely monitoring its financial performance and debt management strategies in the future.