Greif Bros Corporation (GEF)
Financial leverage ratio
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 5,960,800 | 5,469,900 | 5,815,800 | 5,510,900 | 5,426,700 |
| Total stockholders’ equity | US$ in thousands | 1,947,900 | 1,761,300 | 1,514,300 | 1,152,200 | 1,133,100 |
| Financial leverage ratio | 3.06 | 3.11 | 3.84 | 4.78 | 4.79 |
October 31, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $5,960,800K ÷ $1,947,900K
= 3.06
The financial leverage ratio, also known as the equity multiplier, measures the extent to which a company is using debt to finance its assets. It is calculated by dividing the total assets by the total equity. A higher financial leverage ratio indicates a higher degree of financial leverage and implies that the company relies more on debt to finance its assets.
Looking at the financial leverage ratio of Greif Inc over the past five years, we can observe a declining trend from 4.79 in 2019 to 3.06 in 2023. This indicates that the company has reduced its reliance on debt financing relative to equity financing over the period.
A high financial leverage ratio can indicate increased financial risk, as higher levels of debt can lead to higher interest payments and financial obligations. Conversely, a lower leverage ratio can mitigate financial risk and provide more stability, as the company relies more on its equity to support its operations and investments.
The declining trend in Greif Inc's financial leverage ratio suggests a strategic shift towards a more conservative capital structure, with a focus on reducing reliance on debt financing. This may be a prudent move to reduce financial risk and improve the financial stability of the company.
Overall, the decreasing trend in Greif Inc's financial leverage ratio reflects a more conservative approach to capital structure, potentially reducing financial risk and enhancing financial stability. However, further analysis of the company's overall financial health and operating performance would be necessary to fully understand the implications of this trend.