RXO Inc. (RXO)

Based on the solvency ratios provided for RXO Inc., it is evident that the company has maintained a very strong financial position with respect to its debt obligations over the years.

1. Debt-to-Assets Ratio: This ratio indicates the proportion of a company's assets that are financed through debt. RXO Inc. has consistently maintained a debt-to-assets ratio of 0.00 across all years, suggesting that the company funds its assets primarily through equity rather than debt.

2. Debt-to-Capital Ratio: This ratio reflects the extent to which a company's operations are financed through debt compared to its total capital. Similar to the debt-to-assets ratio, RXO Inc. has maintained a debt-to-capital ratio of 0.00 for all years, indicating a strong capital structure with minimal reliance on debt.

3. Debt-to-Equity Ratio: The debt-to-equity ratio signifies the proportion of a company's financing that comes from debt compared to equity. Once again, RXO Inc. shows a debt-to-equity ratio of 0.00 consistently, illustrating a conservative approach to capital structure where equity plays a dominant role.

4. Financial Leverage Ratio: This ratio measures the company's ability to meet its financial obligations by comparing its equity to total assets. While the financial leverage ratio fluctuates slightly over the years, it remains relatively low, indicating a moderate level of risk due to debt financing.

Overall, the solvency ratios portray RXO Inc. as a financially stable company with a strong balance sheet and a prudent approach to managing its debt levels. The consistent low ratios reflect the company's ability to finance its operations effectively while minimizing financial risk and ensuring long-term sustainability.

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Coverage ratios

The interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. For RXO Inc., the interest coverage ratio has shown fluctuations over the past five years. In December 31, 2020, the interest coverage ratio was 3.65, indicating that the company was able to cover its interest expenses 3.65 times over.

The ratio significantly improved in December 31, 2021 to 39.20, signaling a substantial increase in the company's ability to cover its interest obligations. This strong improvement suggests that RXO Inc. had significantly higher earnings relative to its interest expenses during this period.

In subsequent years, the interest coverage ratio remained relatively strong, albeit with slight variations. In December 31, 2022, the ratio was 30.75, indicating continued robust coverage of interest payments. However, there was a notable decline in the coverage ratio in December 31, 2023 to 1.12, potentially raising concerns about the company's ability to meet its interest obligations.

The most recent data point, December 31, 2024, shows a negative interest coverage ratio of -9.13, which suggests that the company's earnings were insufficient to cover its interest expenses during this period. This raises red flags regarding the company's financial health, as a negative interest coverage ratio indicates a potential inability to meet interest payments from operating income alone.

In summary, while RXO Inc. has demonstrated strong interest coverage in some years, the significant fluctuations in the ratio, particularly the negative coverage in 2024, emphasize the importance of monitoring the company's financial performance and debt management going forward.