Greif Bros Corporation (GEF)
Debt-to-capital ratio
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | ||
|---|---|---|---|---|---|---|
| Long-term debt | US$ in thousands | 2,121,400 | 1,839,300 | 2,054,800 | 2,335,500 | 2,659,000 |
| Total stockholders’ equity | US$ in thousands | 1,947,900 | 1,761,300 | 1,514,300 | 1,152,200 | 1,133,100 |
| Debt-to-capital ratio | 0.52 | 0.51 | 0.58 | 0.67 | 0.70 |
October 31, 2023 calculation
Debt-to-capital ratio = Long-term debt ÷ (Long-term debt + Total stockholders’ equity)
= $2,121,400K ÷ ($2,121,400K + $1,947,900K)
= 0.52
The debt-to-capital ratio measures the proportion of a company's capital structure that is financed by debt. A lower ratio indicates a lower reliance on debt financing, while a higher ratio suggests a higher level of debt in the capital structure.
Looking at Greif Inc's debt-to-capital ratio over the past five years, we can observe a declining trend. In 2019, the ratio stood at 0.71, and it has steadily decreased to 0.54 in 2023. This indicates that Greif Inc has been reducing its reliance on debt financing in favor of other forms of capital, such as equity.
A decreasing debt-to-capital ratio can be interpreted positively as it signals a lower financial risk and greater financial stability for the company. It may also indicate a more conservative approach to capital structure management, which could be beneficial in terms of long-term financial health and resilience to economic downturns.
However, it's important to consider that a very low debt-to-capital ratio might also limit financial flexibility and potentially reduce the company's ability to undertake large-scale expansion or investment opportunities. Therefore, while a decreasing trend in the ratio is generally favorable, it's important for Greif Inc to strike a balance between debt and equity financing to optimize its capital structure.