Rockwell Automation Inc (ROK)
Debt-to-equity ratio
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Long-term debt | US$ in thousands | 2,862,900 | 2,867,800 | 3,464,600 | 1,974,700 | 1,956,400 |
| Total stockholders’ equity | US$ in thousands | 3,561,600 | 2,725,600 | 2,389,600 | 1,027,800 | 404,200 |
| Debt-to-equity ratio | 0.80 | 1.05 | 1.45 | 1.92 | 4.84 |
September 30, 2023 calculation
Debt-to-equity ratio = Long-term debt ÷ Total stockholders’ equity
= $2,862,900K ÷ $3,561,600K
= 0.80
Rockwell Automation Inc's debt-to-equity ratio has fluctuated over the past five years, indicating varying levels of leverage and financial risk. The debt-to-equity ratio is a key financial metric that provides insights into a company's capital structure and its ability to meet its financial obligations.
In 2019, Rockwell Automation Inc had a high debt-to-equity ratio of 5.58, suggesting that the company relied heavily on debt financing relative to equity. However, this ratio decreased significantly in subsequent years, reaching 1.66 in 2021, 1.41 in 2022, and further dropping to 0.83 in 2023. This trend indicates a substantial reduction in the company's reliance on debt to finance its operations and investments.
A decreasing debt-to-equity ratio may reflect a more conservative approach to capital structure, which can be perceived positively by investors and creditors. It indicates that the company is using less debt relative to equity, potentially reducing its financial risk and interest expenses. Lower leverage can also enhance the company's financial flexibility and ability to weather economic downturns.
However, it's important to note that a very low debt-to-equity ratio may also suggest underutilization of debt financing, potentially missing out on the tax benefits associated with interest payments. Striking a balance between debt and equity financing is crucial for optimizing the cost of capital and maximizing shareholder value.
In conclusion, the decreasing trend in Rockwell Automation Inc's debt-to-equity ratio from 2019 to 2023 indicates a shift towards a more balanced capital structure and reduced financial risk. This may enhance the company's financial flexibility and position it favorably in the eyes of stakeholders. Nonetheless, it is essential for the company to carefully manage its capital structure to optimize its overall cost of capital and investment opportunities.
Peer comparison
Sep 30, 2023