Kraft Heinz Co (KHC)

Financial leverage ratio

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Total assets	US$ in thousands	88,287,000	90,339,000	90,513,000	93,394,000	99,830,000
Total stockholders’ equity	US$ in thousands	49,185,000	49,526,000	48,678,000	49,298,000	50,103,000
Financial leverage ratio		1.79	1.82	1.86	1.89	1.99

December 31, 2024 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $88,287,000K ÷ $49,185,000K
= 1.79

The financial leverage ratio for Kraft Heinz Co has been showing a declining trend over the past five years, decreasing from 1.99 as of December 31, 2020, to 1.79 as of December 31, 2024. This indicates that the company's reliance on debt to finance its operations has been gradually decreasing over time.

A financial leverage ratio below 2 generally suggests that the company is financing a portion of its assets with equity rather than debt, which may be perceived positively by investors and creditors as it implies a lower risk of financial distress. The decreasing trend in the financial leverage ratio may imply that Kraft Heinz Co has been actively managing its debt levels and working towards a more balanced capital structure.

However, it is important to note that a lower financial leverage ratio may also indicate lower potential returns for shareholders compared to a company with a higher leverage ratio. It can be attributed to the fact that the cost of equity is typically higher than the cost of debt, and a higher proportion of equity in the capital structure can result in a higher cost of capital.

In conclusion, the decreasing trend in Kraft Heinz Co's financial leverage ratio signifies a more conservative approach to capital structure, reducing financial risk but potentially limiting returns for shareholders. This trend should be further analyzed in conjunction with other financial metrics to assess the overall financial health and performance of the company.