Meta Platforms Inc. (META)
Solvency ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.10 | 0.08 | 0.05 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.14 | 0.11 | 0.07 | 0.00 | 0.00 |
| Debt-to-equity ratio | 0.16 | 0.12 | 0.08 | 0.00 | 0.00 |
| Financial leverage ratio | 1.51 | 1.50 | 1.48 | 1.33 | 1.24 |
Meta Platforms Inc.'s solvency ratios show a gradual increase in leverage over the years. The Debt-to-assets ratio has increased from 0.00 in 2020 and 2021 to 0.10 in 2024. The Debt-to-capital ratio has also shown a similar trend, rising from 0.00 in 2020 and 2021 to 0.14 in 2024. The Debt-to-equity ratio has increased from 0.00 in 2020 and 2021 to 0.16 in 2024, indicating a higher reliance on debt financing compared to equity.
The Financial leverage ratio has also been consistently increasing, reaching 1.51 in 2024 from 1.24 in 2020. This suggests that Meta Platforms Inc. has been using more debt to fund its operations and investments, which may increase its financial risk and interest payment obligations in the future. Overall, the increasing trend in solvency ratios signals a shift towards a more leveraged capital structure for the company.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | 101.58 | 107.34 | 156.45 | 3,116.87 | 2,333.64 |
Interest coverage ratio is a financial metric used to evaluate a company's ability to pay interest expenses on its outstanding debt. It is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expenses.
Analyzing Meta Platforms Inc.'s interest coverage over the last few years, we observe a significant fluctuation in the ratio. In December 31, 2020, the interest coverage ratio stood at an impressive 2,333.64, reflecting a robust ability to cover interest expenses with operating profits. This high ratio indicates a low financial risk and ample earnings to meet debt obligations.
By December 31, 2021, Meta Platforms Inc. further improved its interest coverage to 3,116.87, signaling a strengthening financial position and enhanced ability to service its debt. This increase suggests continued profitability and operational efficiency.
However, in the following years, we notice a notable decrease in the interest coverage ratio. By December 31, 2022, the ratio dropped to 156.45, and by December 31, 2023, it decreased further to 107.34. These declines could indicate a potential increase in interest expenses relative to earnings, raising concerns about the company's ability to meet interest obligations.
The trend continued into December 31, 2024, where the interest coverage ratio fell to 101.58. Although still above 1, indicating that Meta Platforms Inc. can cover its interest payments, the decreasing trend over the years suggests a need for monitoring debt levels and operational efficiency to ensure sustainable financial health and debt repayment capacity.
In conclusion, while Meta Platforms Inc. has demonstrated a strong interest coverage ratio in previous years, the recent decline signals a need for careful monitoring of debt levels and operational performance to maintain a healthy financial position and meet debt obligations effectively.