Greif Bros Corporation (GEF)
Debt-to-equity 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-equity ratio | 1.09 | 1.04 | 1.36 | 2.03 | 2.35 |
October 31, 2023 calculation
Debt-to-equity ratio = Long-term debt ÷ Total stockholders’ equity
= $2,121,400K ÷ $1,947,900K
= 1.09
The debt-to-equity ratio measures the proportion of a company's debt to its equity, indicating the extent to which a company is financed by debt compared to equity. In the case of Greif Inc, the trend of its debt-to-equity ratio over the past five years reveals important insights into the company's capital structure and financial leverage.
In 2019, Greif Inc had a relatively high debt-to-equity ratio of 2.43, indicating a significant reliance on debt for its capital structure compared to equity. This suggests a higher financial risk and higher leverage, which could potentially lead to greater financial strain and vulnerability to economic downturns.
However, in the subsequent years, there appears to be a downward trend in the debt-to-equity ratio. By 2020, the ratio decreased to 2.16 and further declined to 1.47 in 2021. This reduction indicates a move towards a more balanced capital structure, potentially reducing financial risk and leverage, as well as increasing the company's financial stability.
The trend continues with a further decrease to 1.09 in 2022 and 1.15 in 2023, reflecting a sustained effort to decrease reliance on debt financing in favor of equity. This could suggest a more conservative approach to capital structure, as well as potentially signaling a more stable and sustainable financial position for Greif Inc.
Overall, the decreasing trend in Greif Inc's debt-to-equity ratio over the five-year period indicates a positive shift towards a more balanced capital structure, potentially reducing financial risk and enhancing the company's long-term financial stability. Nonetheless, it's important to note that the absolute level of the ratio still indicates a significant presence of debt in relation to equity, requiring continued monitoring and management of the company's leverage and financial risk.