RXO Inc. (RXO)
Financial leverage ratio
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | ||
|---|---|---|---|---|
| Total assets | US$ in thousands | 1,825,000 | 1,946,000 | 1,912,000 |
| Total stockholders’ equity | US$ in thousands | 594,000 | 590,000 | 589,000 |
| Financial leverage ratio | 3.07 | 3.30 | 3.25 |
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.
Peer comparison
Dec 31, 2023