Lear Corporation (LEA)
Solvency ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 4.90 | 2.99 | 2.85 | 2.78 | 2.86 |
Lear Corporation demonstrates a strong solvency position as indicated by its consistently low debt-to-assets ratio, which remained at 0.00 over the five-year period from December 31, 2020, to December 31, 2024. This suggests that the company has minimal financial debt relative to its total assets, indicating a low risk of insolvency.
Furthermore, the debt-to-capital ratio and debt-to-equity ratio also remained at 0.00 during the same period, reflecting Lear Corporation's excellent financial health and ability to finance its operations primarily through equity or retained earnings rather than debt.
It is worth noting that the financial leverage ratio increased from 2.86 in 2020 to 4.90 in 2024. While this rise may indicate an increase in financial risk due to higher leverage, it is essential to consider the context and reasons behind this change. Overall, Lear Corporation's strong solvency ratios suggest a stable financial position and strong ability to meet its financial obligations.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | 7.90 | 10.43 | 6.14 | 7.33 | 5.96 |
Interest coverage ratio is a key financial metric that indicates a company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT). For Lear Corporation, the interest coverage ratio has shown variations over the years:
1. In December 31, 2020, the interest coverage ratio was 5.96, indicating that Lear Corporation was generating enough operating income to cover its interest expenses nearly 6 times over.
2. By December 31, 2021, the interest coverage ratio improved to 7.33, suggesting that Lear Corporation's ability to meet its interest obligations had strengthened.
3. In December 31, 2022, the interest coverage ratio slightly decreased to 6.14, indicating a moderate decline in the company's ability to cover its interest expenses compared to the previous year.
4. The interest coverage ratio then notably increased to 10.43 by December 31, 2023, signaling a significant improvement in Lear Corporation's capacity to cover its interest payments with its operating income.
5. Lastly, by December 31, 2024, the interest coverage ratio stood at 7.90, slightly lower than the peak in 2023 but still at a healthy level, indicating Lear Corporation's continued ability to comfortably meet its interest obligations.
Overall, Lear Corporation's interest coverage ratio has shown fluctuations but generally remains at levels that demonstrate the company's ability to service its debt obligations with its operating earnings.