Phillips 66 (PSX)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 2.47 | 2.59 | 2.90 | 2.88 | 2.36 |
Phillips 66's solvency ratios provide insights into the company's ability to meet its financial obligations and the extent of leverage used in its capital structure.
The debt-to-assets ratio indicates the proportion of the company's assets financed by debt. Phillips 66's debt-to-assets ratio has been relatively stable over the past five years, ranging from 0.20 to 0.29, with the latest ratio at 0.26. This suggests that approximately 26% of the company's assets are funded by debt.
The debt-to-capital ratio reflects the percentage of the company's capital structure represented by debt. Phillips 66's debt-to-capital ratio has also shown consistency over the years, with values ranging from 0.32 to 0.46. The ratio as of December 31, 2023, is 0.39, indicating that 39% of the company's capital is attributed to debt.
The debt-to-equity ratio compares the amount of debt to the shareholders' equity in the company. Phillips 66's debt-to-equity ratio has fluctuated, with values between 0.47 and 0.84, reflecting changes in the financing mix. The most recent ratio at 0.63 suggests that debt represents 63% of the company's equity.
The financial leverage ratio measures the extent to which the company is using debt to support its operations and growth. Phillips 66's financial leverage ratio has varied between 2.36 and 2.90 over the past five years, with the latest figure at 2.47. This indicates that the company has, on average, leveraged its operations with around 2.47 times the amount of debt as compared to equity.
Overall, Phillips 66 has maintained a relatively stable solvency position over the years, with a moderate level of debt relative to its assets, capital, and equity. The consistent ratios indicate a balanced approach to financing and suggest that the company has been managing its debt levels effectively.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 11.48 | 22.86 | 3.43 | -7.23 | 647.17 |
Based on the interest coverage ratios provided for Phillips 66 over the past five years, there are some notable trends to consider.
In 2023, the interest coverage ratio stands at 11.48, indicating that Phillips 66's ability to cover its interest expenses with its earnings before interest and taxes (EBIT) has decreased compared to the previous year. This may raise some concerns as a lower interest coverage ratio suggests a lower cushion of safety in meeting interest obligations.
The significant increase in interest coverage from 2020 to 2022, peaking at 24.72, demonstrates a strong improvement in the company's ability to cover its interest expenses during those years. This is a positive sign of financial health and stability, indicating that Phillips 66 was generating ample earnings to comfortably cover its interest obligations.
The negative interest coverage ratio in 2020 (-0.62) is a cause for alarm, as it suggests that Phillips 66's EBIT was insufficient to cover its interest expenses during that year. This could be a red flag for investors and creditors, indicating a potential risk of default on debt obligations.
Overall, Phillips 66's interest coverage ratios have exhibited fluctuations over the five-year period, with some years showing significant improvements while others raising concerns. It is crucial for the company to maintain a healthy interest coverage ratio to ensure its ability to meet interest payments and sustain long-term financial stability.