Mercury Systems Inc (MRCY)

Solvency ratios provide insights into a company's ability to meet its long-term debt obligations. Looking at the trend for Mercury Systems Inc over the past five years:

1. Debt-to-assets ratio: This ratio indicates the proportion of a company's assets financed by debt. The data shows a gradual increase from 0.00 in 2020 to 0.25 in 2024. While the ratio has increased, it still remains relatively low, suggesting that Mercury Systems is not heavily reliant on debt to finance its assets.

2. Debt-to-capital ratio: This ratio measures the proportion of a company's capital structure that is financed by debt. Similar to the debt-to-assets ratio, the debt-to-capital ratio for Mercury Systems has been increasing steadily over the years, from 0.00 in 2020 to 0.29 in 2024. This indicates that the company has been using more debt in its capital structure.

3. Debt-to-equity ratio: The debt-to-equity ratio reflects the extent to which a company is using debt to finance its operations compared to its equity. The trend for Mercury Systems shows a consistent increase from 0.00 in 2020 to 0.40 in 2024, indicating a higher reliance on debt financing relative to equity.

4. Financial leverage ratio: The financial leverage ratio provides an overall view of a company's financial structure and measures how much debt a company has in relation to its equity. Mercury Systems' financial leverage ratio has increased over the years, from 1.16 in 2020 to 1.62 in 2024, indicating a higher level of financial leverage and potential risk as the company relies more on debt to support its operations.

In summary, Mercury Systems Inc has shown a trend of increasing leverage and reliance on debt financing over the past five years, as indicated by the rising debt-to-assets, debt-to-capital, debt-to-equity, and financial leverage ratios. Investors and stakeholders should closely monitor these solvency ratios to assess the company's ability to manage its debt obligations effectively.

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Coverage ratios

The interest coverage ratio of Mercury Systems Inc has been fluctuating over the past five years. In 2020 and 2021, the company had exceptionally high interest coverage ratios of 94.37 and 64.15, respectively, indicating a strong ability to cover its interest expenses multiple times over. However, in 2022, the interest coverage ratio decreased to 4.17, which still suggests the company was able to comfortably cover its interest payments.

The trend took a significant turn in 2023 and 2024 when the interest coverage ratios dropped to -0.93 and -4.41, respectively. These negative ratios indicate that Mercury Systems Inc was unable to cover its interest expenses with its earnings during those periods, which may raise concerns about the company's financial stability and its ability to meet its debt obligations.

Overall, the drastic decrease in interest coverage ratio in the last two years suggests a potential deterioration in the company's financial health and its ability to service its debt obligations. Further analysis and scrutiny of the company's financial performance and debt management may be necessary to understand the reasons behind these significant changes in the interest coverage ratio.