Premier Inc (PINC)

The analysis of Premier Inc’s solvency ratios over the period from June 30, 2021, through June 30, 2025, reveals noteworthy characteristics regarding its financial structure and risk profile.

The debt-to-assets ratio, debt-to-capital ratio, and debt-to-equity ratio consistently report a value of zero across all analyzed periods. This uniformity indicates that Premier Inc has not presented any identifiable debt in its financial statements during these years. Consequently, the company operates with a debt-free capital structure, suggesting a reliance solely on equity financing or internal resources rather than external debt instruments.

In contrast, the financial leverage ratio demonstrates a value greater than one throughout the period, starting at 1.58 in June 2021, decreasing slightly to 1.44 in June 2023, then increasing to 1.73 in June 2024, and reaching 2.02 by June 2025. This ratio measures the proportion of total assets to shareholders’ equity, reflecting how much assets are financed by equity rather than debt. The ratios exceeding one imply that the company’s assets exceed its equity, consistent with asset financing through sources other than debt. However, given the zero debt ratios, this discrepancy might be attributed to other factors such as the classification of certain liabilities or internal accounting practices, or possibly the ratios are derived under different assumptions or frameworks.

Overall, the solvency profile of Premier Inc indicates a low or nonexistent reliance on debt, with leverage ratios suggesting some level of asset financing beyond equity, though the absence of debt ratios complicates a straightforward interpretation of capital structure risk. Such a profile presents a picture of a company with a conservative or possibly pristine capital structure, minimizing insolvency risk associated with leverage but potentially limiting leveraging benefits for growth and expansion.

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Coverage ratios

The interest coverage ratio for Premier Inc. over the period from June 30, 2021, through June 30, 2025, exhibits significant fluctuations, reflecting changes in the company's ability to meet its interest obligations from its earnings before interest and taxes (EBIT).

In 2021, the ratio stood at 21.95, indicating a strong capacity to cover interest expenses, with earnings substantially exceeding interest obligations. This high level of coverage suggests robust financial health and a comfortable margin to service debt.

The year 2022 saw a significant increase in the interest coverage ratio to 30.34. Such an increase points to either a substantial rise in EBIT or a reduction in interest expense, further strengthening the company's ability to meet its interest commitments comfortably.

However, in 2023, the ratio declined sharply to 18.28. Despite this decrease, the ratio remains high, indicating continued strong coverage of interest expenses, though the decline may merit further investigation into potential factors such as increased interest costs or depressed earnings.

A dramatic change occurs in 2024 when the ratio skyrockets to 193.31. This remarkable increase could suggest an exceptionally high level of EBIT during that period, a substantial reduction in interest expenses, or a combination of both, indicating an arguably very strong capacity to meet debt obligations during that year.

In 2025, the ratio falls significantly to 6.69, representing a notable decline from the previous year but still indicating that earnings remain more than sufficient to cover interest expenses, albeit with a reduced margin compared to earlier years.

Overall, the trend demonstrates variability in Premier Inc.'s interest coverage ratio; despite fluctuations, the ratio generally remains well above unity, indicating consistent ability to service interest charges. The substantial rise in 2024 is particularly noteworthy, suggesting either extraordinary earnings or reduced interest costs, whereas the decline in 2023 and subsequent years may reflect operational or financial adjustments that merit further analysis for underlying causes.