Otter Tail Corporation (OTTR)

Financial leverage ratio

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Total assets	US$ in thousands	3,242,570	2,901,660	2,754,830	2,578,350	2,273,600
Total stockholders’ equity	US$ in thousands	1,443,010	1,217,320	990,777	870,966	781,482
Financial leverage ratio		2.25	2.38	2.78	2.96	2.91

December 31, 2023 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $3,242,570K ÷ $1,443,010K
= 2.25

The financial leverage ratio of Otter Tail Corporation has shown a declining trend from 2.91 in 2019 to 2.25 in 2023. This suggests that the company has been gradually reducing its reliance on debt to finance its operations and investments over the years. A lower financial leverage ratio indicates that a company is using less debt relative to equity to fund its assets and operations.

The decreasing trend in the financial leverage ratio could indicate a more conservative financial approach by Otter Tail Corporation, where it is aiming to lower its financial risk and improve its financial stability by reducing its debt levels. By reducing its reliance on debt, the company may have improved its ability to weather economic downturns and maintain financial flexibility.

It is important to note that while a lower financial leverage ratio can lower the risk of financial distress, it may also limit the potential returns that the company can generate on its equity. Therefore, it is crucial for Otter Tail Corporation to strike a balance between debt and equity financing to optimize its capital structure and maximize shareholder value.