Sally Beauty Holdings Inc (SBH)
Financial leverage ratio
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 2,725,250 | 2,576,870 | 2,847,130 | 2,895,150 | 2,098,450 |
| Total stockholders’ equity | US$ in thousands | 508,748 | 293,636 | 280,741 | 15,443 | -60,323 |
| Financial leverage ratio | 5.36 | 8.78 | 10.14 | 187.47 | — |
September 30, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $2,725,250K ÷ $508,748K
= 5.36
The financial leverage ratio, also known as the debt-to-equity ratio, measures the proportion of a company's financing that comes from debt compared to its equity. A lower ratio indicates less reliance on debt for financing, while a higher ratio suggests a greater reliance on debt.
Looking at the financial leverage ratio for Sally Beauty Holdings Inc, we see a significant decrease in the ratio from 2020 to 2023. In 2020, the ratio was exceptionally high at 187.47, indicating that the company had a significantly higher level of debt compared to equity in its capital structure. This could be a cause for concern as high levels of debt can indicate increased financial risk.
However, in the subsequent years, the financial leverage ratio decreased substantially. By 2023, the ratio had decreased to 5.36, reflecting a significant reduction in the company's reliance on debt for financing. This is a positive trend as it suggests that Sally Beauty Holdings Inc has taken measures to reduce its debt levels relative to equity, potentially strengthening its financial position and reducing financial risk.
It's also important to note that in 2021 and 2022, the financial leverage ratio remained relatively high but still showed a declining trend, indicating ongoing efforts to reduce debt levels.
Overall, the decreasing trend in the financial leverage ratio over the years indicates a positive shift in the company's capital structure towards a more balanced mix of debt and equity financing, which is generally favorable for long-term financial stability and sustainability.
Peer comparison
Sep 30, 2023