CarMax Inc (KMX)

Solvency ratios provide insights into a company's ability to meet its long-term financial obligations. Looking at the solvency ratios of CarMax Inc over the last five years, we observe the following trends:

1. Debt-to-assets ratio: This ratio indicates the proportion of a company's assets financed by debt. CarMax's debt-to-assets ratio has been relatively stable over the period, ranging from 0.06 to 0.12. A lower ratio implies a lower financial risk as a smaller portion of assets is funded by debt.

2. Debt-to-capital ratio: This ratio measures the proportion of a company's capital that is financed by debt. CarMax's debt-to-capital ratio has fluctuated between 0.21 and 0.38, showing some variability in the extent of debt in the capital structure. A lower ratio suggests lower leverage and financial risk.

3. Debt-to-equity ratio: This ratio reflects the amount of debt relative to equity in a company's capital structure. CarMax's debt-to-equity ratio has varied between 0.26 and 0.62, indicating fluctuations in the level of financial leverage. A lower ratio is preferred as it signifies a lower dependence on debt financing.

4. Financial leverage ratio: This ratio measures the extent to which a company uses debt to finance its assets. CarMax's financial leverage ratio has ranged from 4.48 to 5.59, showcasing the company's reliance on debt financing. A higher ratio signifies higher financial risk due to increased debt obligations.

Overall, CarMax's solvency ratios suggest that the company has managed its debt levels prudently, with generally low to moderate debt ratios over the past five years. However, fluctuations in some ratios indicate variability in the capital structure and financial risk profile. Investors and stakeholders should continue to monitor these ratios to assess CarMax's ability to meet its long-term financial obligations.

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Coverage ratios

CarMax Inc's interest coverage ratio has displayed some fluctuations over the past five years. The interest coverage ratio measures the company's ability to meet its interest obligations on its outstanding debt.

In the most recent fiscal year ended February 29, 2024, CarMax had an interest coverage ratio of 6.14. This indicates that the company generated operating income 6.14 times higher than its interest expense, implying that it had a comfortable cushion to cover its interest payments.

Comparing this to the previous fiscal year, the interest coverage ratio was slightly higher at 6.29. This suggests that, despite the slight decrease, CarMax continued to demonstrate healthy financial stability in meeting its interest obligations.

On the other hand, the interest coverage ratio was significantly higher in the fiscal year ended February 28, 2022, at 16.86. This may indicate that CarMax had a strong ability to cover its interest costs with its operating income during that period.

Similarly, in the fiscal years ended February 28, 2021, and February 29, 2020, CarMax maintained healthy interest coverage ratios of 12.20 and 14.99, respectively, reflecting a consistent ability to service its debt interest payments.

Overall, while there have been fluctuations in CarMax's interest coverage ratio over the years, the company has generally demonstrated a solid capacity to meet its interest obligations, indicating financial stability and a strong earning power relative to its interest expenses.