RXO Inc. (RXO)

Financial leverage ratio

		Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022
Total assets	US$ in thousands	1,825,000	1,946,000	1,912,000	2,018,000	2,031,000	2,237,000
Total stockholders’ equity	US$ in thousands	594,000	590,000	589,000	585,000	587,000	1,144,000
Financial leverage ratio		3.07	3.30	3.25	3.45	3.46	1.96

December 31, 2023 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $1,825,000K ÷ $594,000K
= 3.07

The financial leverage ratio measures the extent to which a company uses debt to finance its operations compared to its equity. A higher financial leverage ratio indicates that the company is relying more on debt to fund its operations, which can amplify returns but also increase financial risk.

In the case of RXO Inc., the financial leverage ratio has been fluctuating over the past six quarters. It increased from 1.96 in September 2022 to 3.46 in December 2022, indicating a significant increase in debt relative to equity during that period. This spike could have been due to various reasons such as taking on new debt for expansion, acquisitions, or other investments.

Subsequently, the financial leverage ratio decreased in the first quarter of 2023 and remained relatively stable around 3.25 to 3.30 until September 2023. This suggests that RXO Inc. has managed to sustain its level of leverage over the past year, potentially indicating a strategic approach to balancing debt and equity in its capital structure.

It is important for investors and stakeholders to monitor the financial leverage ratio of a company to assess its risk profile and financial health. A sustained high level of leverage could indicate a higher risk of financial distress if the company struggles to meet its debt obligations, especially in challenging economic conditions. On the other hand, a low financial leverage ratio may imply conservative financial management but could limit the company's growth potential.

Overall, the fluctuating trend in RXO Inc.'s financial leverage ratio highlights the importance of closely monitoring the company's capital structure and debt management strategies to ensure long-term financial stability and growth.