PriceSmart Inc (PSMT)

The solvency ratios of PriceSmart Inc over the past five years indicate a consistent and healthy financial position in terms of debt management. The debt-to-assets ratio has shown a decreasing trend from 0.07 in 2020 to 0.05 in 2024, reflecting the company's ability to finance its assets primarily through equity rather than debt.

Similarly, the debt-to-capital ratio has also declined from 0.12 in 2020 to 0.08 in 2024, indicating a reduced reliance on debt for funding its capital structure. This trend suggests that PriceSmart Inc has been effectively managing its debt obligations and strengthening its capital base over the years.

The debt-to-equity ratio has followed a similar pattern, decreasing from 0.14 in 2020 to 0.08 in 2024. This demonstrates a favorable shift towards a lower debt burden relative to equity, showcasing the company's improved financial stability and lower financial risk.

Moreover, the financial leverage ratio has shown a downward trend, decreasing from 1.99 in 2020 to 1.80 in 2024. This decline signifies a decreasing level of financial leverage and indicates that PriceSmart Inc has been operating with lower levels of debt relative to equity, enhancing its solvency position and financial flexibility.

Overall, the solvency ratios of PriceSmart Inc highlight a prudent approach to managing its debt levels and capital structure, which bodes well for the company's long-term financial health and stability.

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Coverage ratios

Interest coverage is a financial ratio that indicates a company's ability to pay interest expenses on its outstanding debt. A higher interest coverage ratio suggests that the company is more capable of servicing its debt obligations.

Based on the data provided, PriceSmart Inc's interest coverage ratio has exhibited significant fluctuations over the past five years. In Aug 31, 2024, the interest coverage ratio was 235.30, indicating a substantial improvement compared to the previous year. This sharp increase suggests that PriceSmart Inc generated significantly more operating income relative to its interest expenses, reflecting a strong ability to meet its interest obligations.

In contrast, the interest coverage ratio in Aug 31, 2023, was 16.35, showing a considerable decrease from the previous year. Although the ratio improved in the subsequent years, the fluctuations indicate variability in the company's ability to cover its interest expenses during this period.

Overall, PriceSmart Inc's interest coverage ratio has shown fluctuations over the past five years, with the most recent ratio indicating a significant improvement in the company's capacity to pay interest on its debt. Monitoring this ratio going forward will be crucial to assess PriceSmart Inc's ongoing ability to manage its debt obligations effectively.