Sonic Automotive Inc (SAH)

Debt-to-capital ratio

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Long-term debt	US$ in thousands	1,616,500	1,672,200	1,510,700	651,800	636,978
Total stockholders’ equity	US$ in thousands	891,900	895,200	1,076,400	814,800	944,800
Debt-to-capital ratio		0.64	0.65	0.58	0.44	0.40

December 31, 2023 calculation

Debt-to-capital ratio = Long-term debt ÷ (Long-term debt + Total stockholders’ equity)
= $1,616,500K ÷ ($1,616,500K + $891,900K)
= 0.64

The debt-to-capital ratio of Sonic Automotive, Inc. has been gradually increasing over the past five years, indicating a rising reliance on debt in the company's capital structure. The ratio has moved from 0.71 in 2019 to 0.80 in 2023, with incremental increases each year. This suggests that a larger proportion of the company's capital is financed through debt rather than equity.

A debt-to-capital ratio of 0.80 at the end of 2023 means that 80% of Sonic Automotive's capital is funded by debt, while the remaining 20% is funded by equity. This level of debt utilization may imply higher financial risk for the company, as it indicates a higher degree of leverage.

Furthermore, the trend of increasing debt-to-capital ratio could potentially indicate that Sonic Automotive has been expanding or financing operations through debt rather than equity issuance. It is important for investors and stakeholders to monitor this trend closely, as excessive debt levels can impact the company's financial stability and ability to meet its obligations in the long term.