Leggett & Platt Incorporated (LEG)
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 | 5.31 | 3.48 | 3.16 | 3.22 | 3.42 |
Leggett & Platt Incorporated demonstrates strong solvency based on its solvency ratios. The Debt-to-assets ratio, Debt-to-capital ratio, and Debt-to-equity ratio have consistently remained at 0.00 from 2020 to 2024. This indicates that the company has not relied heavily on debt to finance its operations and investments, as its total debt is negligible in relation to its assets, capital, and equity.
Additionally, the Financial leverage ratio has shown varying trends over the years, ranging from 3.16 to 5.31. While the ratio increased in 2024, overall, it has been relatively stable. A higher financial leverage ratio signifies greater reliance on debt to finance operations, which can increase financial risk. However, in the context of Leggett & Platt's overall financial stability and the consistently low debt ratios, the fluctuations in the financial leverage ratio may not be a cause for concern.
Overall, based on these solvency ratios, Leggett & Platt Incorporated appears to maintain a conservative financial structure with minimal debt obligations relative to its assets, capital, and equity. This prudent approach indicates a healthy financial position and suggests that the company is well-equipped to meet its financial obligations and weather economic uncertainties.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | -4.93 | -0.96 | 5.98 | 8.04 | 5.10 |
The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt. A higher ratio indicates a stronger ability to cover interest expenses using its operating income. Looking at Leggett & Platt Incorporated's interest coverage ratio over the years:
- As of December 31, 2020, the interest coverage ratio was 5.10, indicating that the company's operating income was able to cover its interest expenses more than five times over.
- By December 31, 2021, the interest coverage ratio improved to 8.04, showing a further increase in the company's ability to cover its interest payments from its operating income.
- However, in the following year (December 31, 2022), the interest coverage ratio slightly declined to 5.98, still indicating a relatively strong ability to meet interest obligations.
- The year ending December 31, 2023, saw a significant decrease in the interest coverage ratio to -0.96, which raises concerns as it suggests that the company's operating income was not sufficient to cover its interest expenses during that period.
- The trend continued to worsen by December 31, 2024, with the interest coverage ratio plummeting to -4.93, signaling a critical situation where the company's operating income was insufficient to cover its interest payments, posing a risk of potential financial distress.
In conclusion, while Leggett & Platt Incorporated demonstrated favorable interest coverage ratios in the earlier years, the sharp decline in the latest years raises red flags regarding its ability to service its interest obligations with operating income. Investors and stakeholders should closely monitor the company's financial performance and debt management strategies to address the deteriorating interest coverage ratio.