Patrick Industries Inc (PATK)

The solvency ratios of Patrick Industries, Inc. indicate the company's ability to meet its long-term financial obligations and the extent to which it has used debt to finance its operations.

1. Debt-to-assets ratio:
- The trend in the debt-to-assets ratio shows a slight decrease from 0.49 in 2021 to 0.40 in 2023, indicating that the company has reduced its reliance on debt to fund its assets.
- A lower debt-to-assets ratio suggests a stronger financial position, as it indicates that a smaller percentage of the company's assets is financed by debt.

2. Debt-to-capital ratio:
- The debt-to-capital ratio has also shown a decreasing trend from 0.63 in 2021 to 0.50 in 2023, reflecting a decreasing reliance on debt to finance the company's operations.
- A declining debt-to-capital ratio indicates that a smaller portion of the company's capital structure is composed of debt, which can enhance financial stability.

3. Debt-to-equity ratio:
- The debt-to-equity ratio has fluctuated over the years, with a notable decline from 1.68 in 2021 to 0.98 in 2023.
- A decreasing debt-to-equity ratio signifies that the company is relying less on debt and has a stronger equity position relative to its debt obligations.

4. Financial leverage ratio:
- The financial leverage ratio has also exhibited a downward trend from 3.45 in 2021 to 2.45 in 2023, indicating reduced financial risk and leverage as compared to previous years.
- A lower financial leverage ratio suggests a lower level of debt financing relative to equity, which is generally considered favorable for long-term solvency.

Overall, the decreasing trend in the solvency ratios of Patrick Industries, Inc. signifies a more conservative approach to managing its capital structure and indicates an improving solvency position over the years.

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Coverage ratios

The interest coverage ratio for Patrick Industries, Inc. has shown fluctuations over the past five years. The ratio was 3.77 in 2023, representing a decrease compared to the prior two years. This decrease may indicate that the company's ability to cover its interest expenses with its earnings has weakened. A lower interest coverage ratio suggests a higher risk of default on its debt obligations.

In 2022, the interest coverage ratio was relatively high at 8.17, indicating a strong ability to meet interest payments from operating income. The company's interest coverage ratio was also robust in 2021 at 6.08, reflecting a healthy financial position. However, there was a noticeable decline from 2021 to 2022.

Looking back to 2020 and 2019, Patrick Industries' interest coverage ratios were 4.03 and 4.22, respectively. These figures suggest a moderate ability to cover interest expenses with operating income during those years.

Overall, it is important for stakeholders to monitor the trend in the interest coverage ratio over time to assess the company's financial health and ability to meet interest obligations. The recent decrease in the ratio in 2023 raises concerns and warrants further investigation into the company's financial leverage and profitability.