Mercer International Inc (MERC)
Financial leverage ratio
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 2,662,580 | 2,725,040 | 2,351,230 | 2,129,130 | 2,065,720 |
| Total stockholders’ equity | US$ in thousands | 635,410 | 838,784 | 694,024 | 601,027 | 550,403 |
| Financial leverage ratio | 4.19 | 3.25 | 3.39 | 3.54 | 3.75 |
December 31, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $2,662,580K ÷ $635,410K
= 4.19
The financial leverage ratio of Mercer International Inc. has exhibited a fluctuating trend over the past five years, ranging from 3.25 to 4.19. The ratio indicates that the company has been increasingly relying on debt to finance its operations, as the ratio has been consistently higher than 3. This implies that a significant portion of Mercer International Inc.'s assets are funded by debt as opposed to equity.
The substantial increase in the financial leverage ratio from 3.25 in 2022 to 4.19 in 2023 raises concerns about the company's risk exposure to debt. A high financial leverage ratio can magnify the impact of financial downturns and interest rate fluctuations on the company's profitability and solvency.
It is important for Mercer International Inc. to carefully manage its debt levels in order to maintain a healthy financial structure and mitigate potential risks associated with high leverage. The company may need to assess its debt repayment capacity and consider strategies to optimize its capital structure for sustainable growth and financial stability.