Foot Locker Inc (FL)

The solvency ratios of Foot Locker Inc provide insight into the company's ability to meet its long-term financial obligations.

1. Debt-to-assets ratio: This ratio indicates the proportion of the company's total assets financed by debt. Foot Locker Inc consistently maintains a low debt-to-assets ratio, fluctuating between 0.00 and 0.05 over the period analyzed. This suggests that the company relies more on equity financing rather than debt to fund its assets.

2. Debt-to-capital ratio: This ratio compares the company's total debt to its total capital, including both debt and equity. Foot Locker Inc's debt-to-capital ratio displays a similar trend as the debt-to-assets ratio, remaining at relatively low levels ranging from 0.00 to 0.12. This indicates a conservative capital structure with a lower dependency on debt for financing.

3. Debt-to-equity ratio: The debt-to-equity ratio measures the company's leverage by comparing its total debt to its total equity. Foot Locker Inc consistently maintains a low debt-to-equity ratio, hovering around 0.00 to 0.14. This implies that the company relies more on equity financing, which provides a cushion against financial risks associated with high debt levels.

4. Financial leverage ratio: The financial leverage ratio reflects the company's total assets in relation to its equity. The financial leverage ratio for Foot Locker Inc fluctuates between 2.32 and 2.51 during the period under review. A decreasing trend in this ratio indicates a reduction in financial risk as the company's reliance on debt decreases relative to its equity.

Overall, based on the analysis of solvency ratios, Foot Locker Inc demonstrates a prudent financial strategy with a conservative approach to debt financing, maintaining a healthy balance between debt and equity to support its long-term financial stability and growth.

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Coverage ratios

The interest coverage ratio for Foot Locker Inc shows a fluctuating trend over the reported periods. As of January 31, 2022, the interest coverage ratio stood at 39.15, indicating that Foot Locker's operating income was 39.15 times higher than its interest expense for that period. The ratio remained relatively stable, hovering around the high 30s to low 40s for the subsequent quarters until January 31, 2023, when it significantly increased to 50.00 and continued to rise in the following quarters.

However, starting from July 31, 2023, there was a notable decrease in Foot Locker's interest coverage ratio, dropping to 14.20, indicating a potential decrease in operating income relative to interest expenses. This decline continued into the subsequent periods, with the ratio falling to 8.42 by October 31, 2023. Notably, as of January 31, 2024, the interest coverage ratio turned negative (-41.70), implying that Foot Locker's operating income was insufficient to cover its interest expenses, raising concerns about the company's financial health.

The negative trend continued in the following quarters, with the interest coverage ratio further deteriorating to -57.88 as of July 31, 2024, signifying a significant strain on Foot Locker's ability to meet its interest obligations from its operating earnings. However, by the end of October 31, 2024, the ratio improved to 3.38, moving into positive territory again.

Overall, the analysis of Foot Locker Inc's interest coverage ratio suggests periods of strong financial health and profitability, followed by a concerning decline and eventual negative coverage, raising red flags about the company's ability to meet its interest payment obligations from operating income. Investors and stakeholders should closely monitor Foot Locker's financial performance and management of debt levels to assess the company's creditworthiness and long-term sustainability.