Helmerich and Payne Inc (HP)
Financial leverage ratio
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 4,381,960 | 4,355,530 | 5,034,130 | 4,829,620 | 5,839,520 |
| Total stockholders’ equity | US$ in thousands | 2,771,940 | 2,765,470 | 2,912,620 | 3,318,510 | 4,012,220 |
| Financial leverage ratio | 1.58 | 1.57 | 1.73 | 1.46 | 1.46 |
September 30, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $4,381,960K ÷ $2,771,940K
= 1.58
The financial leverage ratio, also known as the debt-to-equity ratio, measures the extent to which a company is utilizing debt to finance its operations. A higher financial leverage ratio indicates higher financial risk due to higher reliance on debt financing.
Looking at the financial leverage ratio of Helmerich & Payne, Inc. over the past five years, we can observe fluctuations in the ratio:
Sep 30, 2023: 1.58
Sep 30, 2022: 1.57
Sep 30, 2021: 1.73
Sep 30, 2020: 1.46
Sep 30, 2019: 1.46
The financial leverage ratio has varied over the years, suggesting changes in the company's capital structure and financing decisions. It is worth noting that a financial leverage ratio of 1.0 indicates an equal proportion of debt and equity in financing, while a ratio greater than 1.0 signifies a higher reliance on debt.
The increase in the financial leverage ratio from 1.46 in 2020 to 1.73 in 2021 indicates a higher proportion of debt relative to equity, suggesting that the firm may have taken on more debt in 2021 to finance its operations or growth initiatives. On the other hand, the slight decrease in the ratio to 1.57 in 2022 and then a further increase to 1.58 in 2023 indicates continued fluctuations in the company's debt-to-equity mix.
It's important to consider the industry benchmark and the company's specific circumstances when evaluating the financial leverage ratio. While a higher financial leverage ratio can magnify returns on equity in favorable conditions, it also amplifies the risk in downturns, as the company has higher fixed interest obligations.
Investors and creditors may closely monitor the financial leverage ratio to assess the company's solvency, financial risk, and ability to meet its debt obligations. Overall, the trend in Helmerich & Payne, Inc.'s financial leverage ratio highlights the importance of monitoring the company's capital structure and debt management strategies.
Peer comparison
Sep 30, 2023