Element Solutions Inc (ESI)

The provided data indicates that Element Solutions Inc. exhibited a consistent absence of debt across the entire reporting period from December 31, 2020, through December 31, 2024. Specifically, the debt-to-assets, debt-to-capital, and debt-to-equity ratios remained at zero throughout this timeframe, suggesting that the company did not employ debt financing at any point within these years. This consistent lack of leverage implies that the company's capital structure is entirely equity-based, emphasizing a conservative approach toward debt utilization.

In contrast, the financial leverage ratio demonstrates some variation over the years. Starting at 1.93 on December 31, 2020, it increased steadily to a peak of 2.14 on December 31, 2023, before slightly declining to 2.05 on December 31, 2024. The ratios exceeding 1.9 indicate that the company's assets are leveraged approximately twice its equity, reflecting moderate financial leverage despite the absence of debt. This could be attributable to the use of other financing mechanisms, such as preferred stock or hybrid instruments, or an accounting basis that emphasizes asset valuation.

Overall, the ratios depict a financial strategy that avoids leverage in terms of traditional debt, while maintaining a moderate level of financial leverage attributable to non-debt sources. The stable zero debt ratios highlight a high degree of solvency and financial independence, reducing the company's exposure to interest rate fluctuations or debt repayment risks. The fluctuations in financial leverage suggest some variability in asset composition or financing arrangements, but these remain within a moderate range, indicating a conservative yet flexible capital management approach.

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Coverage ratios

The interest coverage ratio of Element Solutions Inc. exhibits notable fluctuations over the period from December 31, 2020 through December 31, 2024. As of December 31, 2020, the ratio stood at 2.28, indicating that the company's earnings before interest and taxes (EBIT) were just over twice its interest expenses, suggesting a relatively modest buffer against interest obligations.

In the subsequent year, 2021, there was a significant improvement, with the ratio rising sharply to 5.75. This indicates a strengthening of the company's ability to meet its interest payments, reflecting either increased profitability, reduced interest expenses, or both. The positive trend continued into 2022, with the ratio further increasing to 6.54, reinforcing the company's enhanced capacity to cover interest obligations comfortably.

However, in 2023, the ratio declined to 3.62, representing a deterioration in interest coverage. This reduction could be attributable to factors such as decreased earnings, increased interest expenses, or a combination thereof, which diminishes the margin of safety for debt servicing. Despite this decline, the ratio remains above the generally accepted minimum threshold of 1.5 to 2.0, suggesting that the company still maintains a reasonable level of coverage.

The year 2024 experienced a rebound, with the ratio rising again to 6.11. This suggests an improvement in the company's ability to service interest obligations, potentially driven by improved earnings performance, reduction in interest costs, or both. Overall, the trend demonstrates periods of both strengthening and weakening in interest coverage, with the company maintaining a generally satisfactory level of ability to meet interest expenses throughout the analyzed period.