HNI Corp (HNI)

HNI Corp's solvency ratios provide insight into the company's ability to meet its long-term financial obligations and the extent to which it relies on debt financing.

1. Debt-to-assets ratio: This ratio measures the proportion of the company's assets that are financed by debt. HNI Corp's debt-to-assets ratio has been relatively stable over the past five years, ranging from 0.12 to 0.22. This indicates that, on average, between 12% to 22% of the company's assets are funded through debt.

2. Debt-to-capital ratio: The debt-to-capital ratio shows the percentage of a company's capital structure that is financed by debt. HNI Corp's debt-to-capital ratio has also remained fairly consistent over the years, fluctuating between 0.23 and 0.36. This suggests that debt constitutes approximately 23% to 36% of the company's total capital.

3. Debt-to-equity ratio: The debt-to-equity ratio indicates the extent to which the company relies on debt versus equity to finance its operations. HNI Corp's debt-to-equity ratio has shown an increasing trend, rising from 0.30 in 2019 to 0.56 in 2023. This suggests that the company's reliance on debt relative to equity has increased over the years.

4. Financial leverage ratio: The financial leverage ratio measures the company's total debt relative to its equity. HNI Corp's financial leverage ratio has varied between 2.29 and 2.54 over the past five years. A higher financial leverage ratio indicates higher financial risk, as the company has more debt in its capital structure compared to equity.

In summary, HNI Corp's solvency ratios suggest that the company has maintained a relatively stable level of debt relative to its assets and capital, but has shown an increasing reliance on debt in relation to equity. The financial leverage ratio indicates that the company carries a moderate level of financial risk due to the amount of debt in its capital structure. It is important for investors and stakeholders to monitor these solvency ratios to assess the company's ability to manage its long-term debt obligations.

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Coverage ratios

The interest coverage ratio of HNI Corp has fluctuated over the last five years. In 2023, the interest coverage ratio was 3.54, a significant decrease compared to the ratios of 17.64 in 2022 and 17.54 in 2019. This indicates that the company's ability to cover its interest expenses with its operating income declined in 2023. However, it is important to note that the ratio was still above 1, suggesting that the company generated enough operating income to cover its interest expenses.

The lower interest coverage ratio in 2023 could be a cause for concern, as it may indicate increased financial risk related to the company's debt obligations. Investors and creditors may view a declining interest coverage ratio unfavorably, as it could signal potential difficulties in meeting debt payments in the future.

Overall, HNI Corp's interest coverage ratio experienced fluctuations over the past five years, and it is crucial for the company to monitor this ratio closely to ensure it remains at a healthy level to meet its debt obligations effectively.