Phillips 66 (PSX)

Financial leverage ratio

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Total assets	US$ in thousands	75,501,000	76,442,000	55,594,000	54,721,000	58,720,000
Total stockholders’ equity	US$ in thousands	30,583,000	29,494,000	19,166,000	18,984,000	24,910,000
Financial leverage ratio		2.47	2.59	2.90	2.88	2.36

December 31, 2023 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $75,501,000K ÷ $30,583,000K
= 2.47

The financial leverage ratio of Phillips 66 has shown fluctuations over the past five years. The ratio decreased from 2.36 in 2019 to 2.47 in 2023. This indicates that the company's reliance on debt to finance its operations has reduced slightly in 2023 compared to 2019. However, it is essential to note that the financial leverage ratio increased significantly from 2021 to 2022, reaching its peak at 2.90, before decreasing to 2.59 in 2022.

A financial leverage ratio above 1 indicates that the company has more debt than equity in its capital structure. In the case of Phillips 66, the ratio has consistently been above 1 over the five-year period, signaling that the company has been using debt as a significant part of its financing strategy. While the decreasing trend in recent years suggests a relative reduction in debt usage, the ratio still remains relatively high.

It is important for stakeholders to closely monitor the financial leverage ratio of Phillips 66 to assess its risk profile and ability to meet its debt obligations. Overall, the company's financial leverage ratio indicates a moderate level of leverage, but proactive management of debt levels may be necessary to maintain a healthy balance sheet.