Scholastic Corporation (SCHL)

The analysis of Scholastic Corporation's solvency ratios over the period from May 31, 2021, to May 31, 2025, reveals a consistent absence of debt-related obligations, as evidenced by the debt-to-assets ratio, debt-to-capital ratio, and debt-to-equity ratio remaining at zero throughout the entire timeframe. This indicates that the company does not utilize debt financing and relies primarily on equity or internal sources for its capital structure.

The financial leverage ratio, however, provides insight into the degree of leverage employed by the company, showing a decreasing trend from 1.70 in May 2021 to 1.59 in May 2022, followed by relative stability around 1.60 through May 2023 and May 2024, and then an increase to 2.06 by May 2025. The relatively low and stable debt ratios imply a conservative capital structure, suggesting minimal financial risk associated with debt obligations. Nonetheless, the rising financial leverage ratio at the end of the period could indicate a slight increase in leverage, potentially through other liabilities or off-balance-sheet arrangements, though not reflected in traditional debt ratios.

Overall, the data indicates that Scholastic Corporation maintains a highly conservative solvency profile characterized by no long-term or short-term debt, and its leverage appears manageable, with an unexpected increase in the financial leverage ratio in 2025 warranting further investigation to understand underlying capital structure changes.

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Coverage ratios

The interest coverage ratio for Scholastic Corporation has exhibited significant fluctuations over the analyzed period from May 31, 2021, to May 31, 2025.

In the fiscal year ending May 31, 2021, the company reported a negative interest coverage ratio of -5.32, indicating that its earnings before interest and taxes (EBIT) were insufficient to cover interest expenses, suggesting a period of financial distress or significant liabilities. This negative figure reflects either substantial interest obligations or exceptionally low operating earnings, raising concerns about the company's ability to meet interest obligations during that time.

By the following year, ending May 31, 2022, the interest coverage ratio experienced a dramatic turnaround, rising to 31.93. This considerable improvement signals a substantial increase in operating earnings relative to interest expenses, reflecting enhanced profitability or reduced interest costs, and implying a much healthier capacity to meet interest obligations.

The subsequent year, ending May 31, 2023, saw the ratio escalate further to 81.29, indicating extremely strong EBIT relative to interest expenses. Such a high interest coverage ratio typically signifies that the company generated ample operating earnings to comfortably meet its interest obligations, suggesting an optimal financial position concerning debt servicing.

However, in the fiscal year ending May 31, 2024, the ratio declined significantly to 9.53. While still above the generally considered safe threshold of 3, this decrease reflects a reduction in operating earnings or increased interest expenses, indicating a potential easing of financial strength compared to the previous year but remaining within a generally healthy range.

Finally, the year ending May 31, 2025, experienced a further decline in the interest coverage ratio to 0.92. This figure falls below 1, signaling that operating earnings are insufficient to cover interest expenses, which raises concerns regarding the company's ability to service its debt without additional revenue or cost adjustments. Such a situation may suggest impending financial distress or the need for restructuring or refinancing efforts.

Overall, the interest coverage ratio for Scholastic Corporation demonstrates a volatile trend, with periods of significant financial strength interspersed with notable declines. The substantial fluctuation underscores the importance of the company's operational performance and interest management strategies in maintaining financial stability over this period.