JM Smucker Company (SJM)
Financial leverage ratio
| Apr 30, 2024 | Apr 30, 2023 | Apr 30, 2022 | Apr 30, 2021 | Apr 30, 2020 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 20,273,700 | 14,991,400 | 16,055,000 | 16,284,200 | 16,970,400 |
| Total stockholders’ equity | US$ in thousands | 7,693,900 | 7,290,800 | 8,140,100 | 8,124,800 | 8,190,900 |
| Financial leverage ratio | 2.64 | 2.06 | 1.97 | 2.00 | 2.07 |
April 30, 2024 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $20,273,700K ÷ $7,693,900K
= 2.64
The financial leverage ratio of JM Smucker Company has shown fluctuations over the past five years. The ratio increased from 2.00 in April 2021 to 2.64 in April 2024, indicating a higher level of financial leverage in the most recent period. This rise suggests that the company has been relying more on debt financing compared to equity financing in April 2024.
While a higher financial leverage ratio can amplify returns on equity when the business is performing well, it also increases the risk associated with debt repayment obligations and interest payments, especially in economic downturns or when facing operational challenges. It is essential for investors and stakeholders to monitor this ratio closely to assess the company's ability to manage its debt levels prudently and sustain its financial health in the long term.