LKQ Corporation (LKQ)
Financial leverage ratio
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 15,079,000 | 12,038,000 | 12,606,000 | 12,360,500 | 12,780,000 |
| Total stockholders’ equity | US$ in thousands | 6,167,000 | 5,453,000 | 5,772,000 | 5,655,720 | 5,008,880 |
| Financial leverage ratio | 2.45 | 2.21 | 2.18 | 2.19 | 2.55 |
December 31, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $15,079,000K ÷ $6,167,000K
= 2.45
The financial leverage ratio of LKQ Corp has shown fluctuations over the past five years, ranging from 2.18 to 2.55. The ratio indicates that the company has been utilizing debt as a source of financing in its capital structure.
The trend indicates an increase in financial leverage from 2021 to 2023, with the ratio reaching its highest point in 2019 and then gradually decreasing in the subsequent years. This may suggest that the company has been reducing its reliance on debt financing or optimizing its capital structure.
A financial leverage ratio of 2.45 in 2023 means that for every dollar of equity in the company, there is $2.45 of debt. While a higher financial leverage ratio can magnify returns on equity when business is booming, it also increases the risk of financial distress during economic downturns or challenges in generating sufficient earnings to cover interest expenses.
Overall, the fluctuating trend in the financial leverage ratio of LKQ Corp indicates the company's changing approach towards debt management and capital structure optimization over the years.