Emerson Electric Company (EMR)

Financial leverage ratio

		Sep 30, 2024	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020
Total assets	US$ in thousands	44,246,000	42,746,000	35,672,000	24,715,000	22,882,000
Total stockholders’ equity	US$ in thousands	21,636,000	20,689,000	10,364,000	9,883,000	8,405,000
Financial leverage ratio		2.05	2.07	3.44	2.50	2.72

September 30, 2024 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $44,246,000K ÷ $21,636,000K
= 2.05

Emerson Electric Company's financial leverage ratio has fluctuated over the past five years. The ratio was 2.05 in 2024, slightly lower than the previous year's ratio of 2.07. In 2022, there was a significant increase in the financial leverage ratio to 3.44, indicating higher financial leverage compared to the surrounding years. In 2021 and 2020, the ratio was 2.50 and 2.72, respectively.

A financial leverage ratio above 1 indicates that the company relies more on debt to finance its operations, while a ratio below 1 signifies a greater reliance on equity. Emerson Electric Company's ratios above 2 suggest a higher level of financial leverage, indicating a relatively higher proportion of debt in its capital structure compared to equity.

It is important to consider the reasons behind the changes in the financial leverage ratio and to assess the company's overall financial health and risk profile. A high financial leverage ratio can indicate increased financial risk and vulnerability to economic downturns, as higher debt levels typically come with higher interest payments that can impact profitability. Additionally, fluctuations in the ratio could be influenced by changes in the company's capital structure, investment decisions, and overall financial performance.