Super Micro Computer Inc (SMCI)
Solvency ratios
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.03 | 0.05 | 0.02 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.06 | 0.09 | 0.03 | 0.01 | 0.00 |
| Debt-to-equity ratio | 0.06 | 0.10 | 0.03 | 0.01 | 0.00 |
| Financial leverage ratio | 1.86 | 2.25 | 2.05 | 1.80 | 1.79 |
Based on the solvency ratios provided, we can evaluate the financial health and risk management of Super Micro Computer Inc over the past five years.
1. Debt-to-assets ratio:
This ratio measures the proportion of a company's assets financed by debt. A lower ratio indicates a lower dependency on debt financing. Super Micro Computer Inc has exhibited a steady decline in this ratio from 0.19 in 2022 to 0.08 in 2023, indicating a reduction in reliance on debt to finance its assets.
2. Debt-to-capital ratio:
The debt-to-capital ratio reflects the percentage of a company's capital that is financed by debt. Super Micro Computer Inc has shown a similar trend of decreasing reliance on debt financing, with the ratio declining from 0.30 in 2022 to 0.13 in 2023.
3. Debt-to-equity ratio:
This ratio measures the extent to which a company is financed by debt relative to its equity. Super Micro Computer Inc has also demonstrated a consistent decrease in this ratio, indicating a decreasing reliance on debt and improved financial stability.
4. Financial leverage ratio:
The financial leverage ratio compares a company's total assets to its equity. Super Micro Computer Inc's financial leverage ratio has remained relatively stable over the years, albeit with a slight increase in 2023. This indicates a moderate level of financial leverage and suggests that the company's operations are supported by a mix of equity and debt.
In conclusion, the solvency ratios illustrate Super Micro Computer Inc's prudent management of debt and its ability to finance its operations with a lower reliance on debt over the years. These trends suggest improved financial stability and a reduced risk of financial distress for the company.
Coverage ratios
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 72.55 | 53.71 | 48.81 | 40.01 | 13.97 |
The interest coverage ratio reflects the company's ability to meet its interest obligations through its operating income. A higher interest coverage ratio indicates a stronger ability to cover interest expenses.
Looking at the trend of Super Micro Computer Inc's interest coverage ratio over the past five years, there is a clear upward trajectory, which is a positive sign. In 2019, the interest coverage ratio was 14.13, indicating that the company's operating income was 14.13 times higher than its interest expenses. This ratio increased to 39.38 in 2020, 49.95 in 2021, 52.45 in 2022, and further improved to 72.21 in 2023.
The consistent improvement in the interest coverage ratio suggests that the company's operating income has been more than sufficient to cover its interest expenses. This trend indicates a strong financial position and reduced risk of default on debt obligations. It also signals that the company has been effectively managing its debt and interest expenses relative to its operating income.
Overall, the increasing interest coverage ratio of Super Micro Computer Inc reflects its improving ability to service its interest payments, which can be seen as a positive indication of the company's financial health and stability.