Scotts Miracle-Gro Company (SMG)

The solvency ratios of Scotts Miracle-Gro Company show a trend of increasing leverage over the past five years. The debt-to-assets ratio has risen steadily from 0.43 in 2020 to 0.76 in 2024, indicating that the company's reliance on debt to finance its assets has increased. This suggests that a significant portion of the company's assets are funded by debt.

Similarly, the debt-to-capital ratio has also increased over the same period, from 0.68 in 2020 to 1.22 in 2024. This ratio indicates the proportion of the company's capital that is financed by debt, and the upward trend highlights the growing use of debt in the capital structure.

The debt-to-equity ratio was not available for 2020 and 2021 but has been provided for 2022 onwards. It shows a significant jump from 2.09 in 2021 to 19.13 in 2022, reflecting a substantial increase in the company's debt relative to its equity. This sharp rise suggests that Scotts Miracle-Gro has taken on a higher level of debt compared to its equity position.

Lastly, the financial leverage ratio, which indicates the extent to which a company is using debt to finance its operations, has also shown a notable increase over the years, from 4.85 in 2020 to 29.09 in 2022. This indicates the magnified effect of debt on the company's financial position and earnings due to higher leverage.

In summary, Scotts Miracle-Gro Company's solvency ratios reveal a pattern of escalating leverage and reliance on debt financing in recent years, which could potentially pose risks in terms of financial stability and ability to meet debt obligations in the long term.

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Coverage ratios

The interest coverage ratio measures a company's ability to pay its interest expenses on outstanding debt. A higher ratio indicates a greater ability to meet interest payments.

Looking at the data for Scotts Miracle-Gro Company, the interest coverage ratio has fluctuated over the past five years. In 2024, the ratio was 0.85, which suggests that the company's operating income was only sufficient to cover 85% of its interest expenses. This may raise concerns about the company's ability to service its debt obligations.

In 2023 and 2022, the interest coverage ratios were negative (-1.55 and -3.73, respectively), indicating that the company's operating income was not enough to cover its interest expenses. This is a red flag for investors and creditors, as it suggests financial distress and a potential inability to meet debt obligations.

On the other hand, in 2021 and 2020, the interest coverage ratios were 9.52 and 7.42, respectively, indicating a strong ability to cover interest payments with operating income. This suggests that the company was in a better financial position during those years.

Overall, the trend in Scotts Miracle-Gro Company's interest coverage ratio shows variability, with some years indicating strong financial health and others raising concerns about the company's ability to meet its debt obligations. Investors and creditors should carefully monitor this ratio to assess the company's financial stability.