Sonic Automotive Inc (SAH)

Sonic Automotive, Inc.'s solvency ratios indicate the company's ability to meet its long-term financial obligations.

The Debt-to-assets ratio has been gradually increasing over the past five years, reaching 0.67 in 2023. This ratio suggests that approximately 67% of the company's assets are financed by debt. While an increase in this ratio could imply a higher level of financial risk, Sonic Automotive, Inc. still maintains a reasonable level of asset coverage by debt.

The Debt-to-capital ratio has also been on an upward trend, reaching 0.80 in 2023. This ratio indicates that 80% of the company's capital is funded by debt. A higher Debt-to-capital ratio could suggest a heavy reliance on debt financing, which may increase financial risk and interest expense for the company.

The Debt-to-equity ratio has shown significant fluctuations over the past five years, with a notable spike to 4.05 in 2023. This ratio indicates that for every dollar of equity, Sonic Automotive, Inc. has $4.05 of debt. The increasing trend in this ratio signals a higher level of financial leverage and potential risk for the company's shareholders.

The Financial leverage ratio, which measures the company's total assets in relation to its equity, has also been increasing steadily over the years, reaching 6.01 in 2023. This ratio indicates that the company's assets are leveraged at a ratio of 6.01 times its equity. A higher financial leverage ratio implies a higher degree of financial risk and potential volatility in earnings.

Overall, Sonic Automotive, Inc.'s solvency ratios suggest that the company has been increasingly relying on debt to finance its operations and growth. This trend warrants close attention to ensure the company maintains a healthy balance between debt and equity to support its long-term financial stability and success.

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Coverage ratios

Sonic Automotive, Inc.'s interest coverage has shown fluctuations over the past five years. The interest coverage ratio measures a company's ability to meet its interest expenses with its operating income. In 2023, the interest coverage ratio decreased to 2.77 from 5.11 in 2022, indicating that the company's ability to cover its interest payments with operating income weakened significantly. This may raise concerns about the company's ability to meet its debt obligations in the short term, as a lower interest coverage ratio suggests a higher risk of default.

Comparing to the previous years, the interest coverage ratio was notably higher in 2021 at 8.32, indicating a strong ability to cover interest payments. This suggests that Sonic Automotive's performance in 2023 was less robust compared to 2021. The ratios for 2020 and 2019 were also lower than 2021, indicating a fluctuating trend in the company's ability to cover interest expenses over the years.

Overall, Sonic Automotive, Inc. should closely monitor its interest coverage ratio to ensure it maintains a healthy level of financial stability and avoids potential liquidity issues. High fluctuations in this ratio may indicate changes in the company's financial health and its ability to service its debt obligations effectively.