Graham Holdings Co (GHC)

Graham Holdings Co.'s solvency ratios provide insights into the company's long-term financial stability and ability to meet its debt obligations.

1. Debt-to-assets ratio: This ratio remained consistent at 0.11 throughout the four quarters of 2023 and for the entire year of 2022. This indicates that only 11% of the company's total assets are funded by debt, reflecting a conservative approach to leverage and a strong asset base.

2. Debt-to-capital ratio: The debt-to-capital ratio also remained relatively stable at around 0.16-0.17 in 2023. This ratio signifies that debt contributes around 16-17% to the company's total capital structure, suggesting a balanced mix of debt and equity financing.

3. Debt-to-equity ratio: The debt-to-equity ratio fluctuated slightly in 2023, ranging from 0.18 to 0.21. This ratio indicates that for every dollar of equity, the company has around 18-21 cents of debt. The trend suggests a moderate level of financial risk, with the company relying more on equity financing than debt.

4. Financial leverage ratio: The financial leverage ratio, which measures the company's total assets relative to equity, increased gradually from 1.65 in Q1 2022 to 1.81 in Q4 2023. This indicates that the company's reliance on debt to finance its assets has been increasing over time.

Overall, Graham Holdings Co. has maintained a conservative approach to debt management based on the analyzed solvency ratios. The company has a strong asset base relative to its debt levels, a balanced capital structure, and a moderate level of financial risk. However, the increase in the financial leverage ratio suggests a slight shift towards more aggressive financing, which should be monitored for potential impact on the company's long-term solvency.

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Coverage ratios

The interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. It is calculated by dividing the company's earnings before interest and taxes (EBIT) by its interest expense. A higher interest coverage ratio indicates that the company is more capable of servicing its debt obligations.

Based on the data provided for Graham Holdings Co., the interest coverage ratios fluctuated over the past eight quarters. In Q4 2023, the interest coverage ratio was 2.91, indicating that the company earned 2.91 times the amount required to cover its interest payments. This ratio improved in Q3 2023 to 4.07 and continued to increase in Q2 2023 to 4.36, reflecting a stronger ability to cover interest expenses.

Throughout the previous quarters, Graham Holdings Co. maintained relatively healthy interest coverage ratios, with values above 3.00 in most periods. The company's interest coverage ratio was highest in Q2 2023 at 4.36, suggesting a robust financial position to meet its interest obligations.

However, there were fluctuations observed in the interest coverage ratio over the quarters, with the lowest ratio reported in Q2 2022 at 2.76. This implies a temporary decrease in the company's ability to cover interest payments during that period.

In conclusion, based on the trend analysis of Graham Holdings Co.'s interest coverage ratios, the company generally demonstrated a sound ability to meet its interest payments over the quarters, with some variability in the ratio. It is essential for the company to maintain a sufficient interest coverage ratio to ensure financial stability and minimize the risk associated with debt obligations.