Stride Inc (LRN)

Solvency ratios provide valuable insights into a company's financial health and its ability to meet its long-term obligations. Let's analyze the solvency ratios of Stride Inc:

1. Debt-to-assets ratio: This ratio indicates the proportion of a company's assets that are financed by debt. A lower ratio is generally preferable as it suggests lower financial risk. Stride Inc's debt-to-assets ratio has been consistently low over the years, ranging from 0.00 in 2020 to 0.25 in 2022. The decrease in 2021 followed by a slight increase in 2022 indicates a moderate level of debt relative to assets.

2. Debt-to-capital ratio: This ratio measures the percentage of a company's capital that is financed by debt. Stride Inc's debt-to-capital ratio has been relatively stable, ranging from 0.00 in 2020 to 0.34 in 2022. The increase in 2021 and 2022 suggests a higher reliance on debt to fund its operations compared to earlier years.

3. Debt-to-equity ratio: This ratio reflects the proportion of a company's financing that comes from debt and equity. A lower ratio indicates lower financial risk. Stride Inc's debt-to-equity ratio has shown fluctuations over the years, with a significant increase from 0.00 in 2020 to 0.51 in 2022. The higher ratio in recent years suggests a greater reliance on debt financing compared to equity.

4. Financial leverage ratio: This ratio measures the extent to which a company uses debt to finance its operations. A higher ratio indicates higher financial leverage and risk. Stride Inc's financial leverage ratio has shown an increasing trend from 1.59 in 2020 to 2.02 in 2022. This indicates that the company has been increasingly using debt to support its operations, which may expose it to higher financial risks.

Overall, while Stride Inc has maintained a relatively healthy solvency position with low debt levels compared to assets, the increasing trend in the debt-related ratios over the years, such as debt-to-capital and financial leverage ratios, suggests a growing reliance on debt financing. Investors and stakeholders should continue to monitor these ratios to assess the company's long-term financial stability and risk management strategies.

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Coverage ratios

The interest coverage ratio of Stride Inc has exhibited a declining trend over the past five years. In 2024, the interest coverage ratio stands at 58.33, down from 79.57 in 2023, 88.54 in 2022, and 99.42 in 2021. This declining trend indicates that the company's ability to cover its interest expenses from its operating income has weakened over time. However, it is important to note that the ratio remains above 1, indicating that the company is still generating sufficient earnings to cover its interest obligations. This trend may be a cause for concern and may warrant further investigation into the company's financial health and profitability.