Lithia Motors Inc (LAD)

Lithia Motors Inc's solvency ratios indicate a strong financial position with decreasing debt levels over the years. The Debt-to-assets ratio, which measures the proportion of assets financed by debt, decreased from 0.25 in 2020 to 0.00 in 2022-2024, indicating a lower reliance on debt to fund its assets.

Similarly, the Debt-to-capital ratio, which assesses the proportion of capital funded by debt, decreased from 0.42 in 2020 to 0.00 in 2022-2024. This trend suggests a shift towards a more capital-funded structure, reducing the company's debt exposure.

The Debt-to-equity ratio, reflecting the extent of debt financing relative to equity, declined from 0.74 in 2020 to 0.00 in 2022-2024, highlighting a decreasing reliance on debt for financing its operations and investments.

Furthermore, the Financial leverage ratio, a measure of the company's use of debt to finance its assets, fluctuated between 2.41 and 3.48 during the period. Although increasing from 2022 onwards, it remains within a manageable range, indicating reasonable leverage levels.

Overall, the solvency ratios demonstrate Lithia Motors Inc's improving solvency position, with decreasing debt levels and a stronger capital structure, suggesting a favorable financial stability and ability to meet its financial obligations effectively.

---

Coverage ratios

Interest coverage ratio measures a company's ability to pay its interest expenses on outstanding debt. A higher interest coverage ratio indicates a company is more capable of meeting its interest obligations.

Based on the data provided for Lithia Motors Inc, the interest coverage ratio has shown fluctuations over the years. In December 2020, the ratio was 8.87, indicating the company could cover its interest expense 8.87 times.

By December 2021, the ratio improved significantly to 14.53, suggesting an increased ability to meet interest payments. This positive trend continued into December 2022, with a slightly lower but still robust interest coverage ratio of 14.34.

However, there was a notable decline in the interest coverage ratio by December 2023 to 8.14, which may raise concerns about the company's ability to cover interest payments effectively.

By December 2024, the ratio decreased further to 5.99, indicating a potential strain on the company's ability to cover its interest expenses. It would be important for stakeholders to monitor this trend closely to ensure the company's financial health and ability to manage its debt obligations effectively.