Simply Good Foods Co (SMPL)

The solvency ratios for Simply Good Foods Co show the company's ability to meet its long-term financial obligations and the extent to which it relies on debt to finance its operations.

1. Debt-to-assets ratio:
- The debt-to-assets ratio has been relatively stable over the past five years, ranging from 0.13 to 0.30.
- This ratio indicates that the company relies on debt for less than 30% of its total assets, showing a generally low level of financial risk in terms of asset coverage by debt.

2. Debt-to-capital ratio:
- The debt-to-capital ratio has also remained consistent over the years, varying between 0.15 and 0.34.
- This ratio reflects the proportion of the company's capital structure that is funded by debt, with the company typically using debt to finance less than 35% of its capital.

3. Debt-to-equity ratio:
- The debt-to-equity ratio has shown some fluctuation but has generally decreased over the years, indicating a reduced reliance on debt in relation to shareholders' equity.
- The downward trend in this ratio suggests that the company is becoming less leveraged and improving its equity cushion.

4. Financial leverage ratio:
- The financial leverage ratio has decreased from 1.76 in 2020 to 1.41 in 2024, indicating a reduction in the company's overall leverage.
- This ratio measures the extent to which the company's operations are financed by debt, with lower values indicating a lower reliance on debt financing.

Overall, the solvency ratios of Simply Good Foods Co demonstrate a prudent approach to managing its long-term financial obligations, with a gradual reduction in its reliance on debt over the years.

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Coverage ratios

The interest coverage ratio measures a company's ability to pay its interest expenses on outstanding debt. Simply Good Foods Co's interest coverage has been relatively stable over the past five years, ranging from 3.41 to 7.93. A higher interest coverage ratio indicates that the company is more capable of meeting its interest obligations from its operating earnings.

In the most recent year, as of August 31, 2024, the interest coverage ratio stood at 7.93, which suggests that Simply Good Foods Co generated nearly 8 times the operating income needed to cover its interest expenses. This indicates a strong ability to meet interest payments comfortably.

Comparing this to the previous years, we see a general positive trend in interest coverage, reflecting improved earnings relative to interest expenses. The lowest ratio of 3.41 in August 29, 2020 indicates a lower ability to cover interest payments, but the subsequent years show a clear improvement.

Overall, Simply Good Foods Co's interest coverage has shown a positive trend over the past five years, implying a solid financial position with adequate earnings to cover interest costs, which is a positive signal for investors and creditors.