International Paper (IP)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.23 | 0.20 | 0.21 | 0.25 | 0.29 |
| Debt-to-capital ratio | 0.40 | 0.36 | 0.37 | 0.51 | 0.55 |
| Debt-to-equity ratio | 0.65 | 0.57 | 0.59 | 1.02 | 1.24 |
| Financial leverage ratio | 2.78 | 2.82 | 2.78 | 4.04 | 4.34 |
The solvency ratios of International Paper Co. indicate the company's ability to meet its long-term financial obligations and manage its debt levels effectively.
The debt-to-assets ratio has shown a fluctuating trend over the past five years, ranging from 0.30 to 0.42. The lower the ratio, the higher the asset coverage by debt, indicating lower financial risk. The company's debt-to-assets ratio has remained relatively stable around 0.30 to 0.33, suggesting that the company has been able to effectively utilize its assets to generate revenue and manage its debt levels.
The debt-to-capital ratio reflects the proportion of debt in the company's capital structure. International Paper Co.'s debt-to-capital ratio has decreased from 0.64 in 2019 to 0.48 in 2023. This indicates a decreasing reliance on debt to finance its operations and investments, which may translate to a lower financial risk and improved financial stability.
The debt-to-equity ratio measures the extent to which a company is financed by debt versus equity. International Paper Co.'s debt-to-equity ratio has shown a decreasing trend from 1.81 in 2019 to 0.92 in 2023. This signifies a positive shift towards a more equity-funded capital structure, reducing the company's dependency on debt financing and potentially lowering its financial risk.
The financial leverage ratio indicates the proportion of the company's assets that are financed through debt. International Paper Co.'s financial leverage ratio has decreased from 4.34 in 2019 to 2.78 in 2023. A lower financial leverage ratio implies a lower level of financial risk and a healthier balance sheet structure.
Overall, International Paper Co.'s solvency ratios reflect a positive trend towards lower debt dependency and improved financial stability over the past five years. The company has managed to maintain a balanced debt-to-assets ratio, reduce its debt-to-capital and debt-to-equity ratios, and lower its financial leverage ratio, indicating a stronger financial position and enhanced ability to meet its long-term obligations.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 1.82 | 4.15 | 5.51 | 2.10 | 3.43 |
The interest coverage ratio of International Paper Co. has been fluctuating over the past five years. In 2019, the company had an interest coverage ratio of 5.45, indicating that it earned 5.45 times the amount of interest expenses incurred during that year. This suggests a strong ability to cover interest payments with operating income.
Subsequently, in 2020, the interest coverage ratio decreased to 3.95. Although it remained above 1 (indicating the company could cover its interest payments), the decline may suggest a slightly reduced ability to cover interest expenses compared to the previous year.
In 2021 and 2022, International Paper Co. saw an improvement in its interest coverage ratio, with values of 5.28 and 5.38, respectively. These ratios indicate a solid ability to cover interest expenses with operating income, reflecting positively on the company's financial health and stability.
However, in 2023, the interest coverage ratio decreased further to 3.23. While still above 1, the declining trend over the past two years may raise concerns about the company's ability to cover interest payments with its operating income at a similar level as in prior years. It would be prudent for stakeholders to monitor this trend to ensure the company's financial health is being maintained.