Smurfit WestRock plc (SW)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|
| Debt-to-assets ratio | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 0.00 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 2.27 | 2.48 | 2.67 | 2.73 |
Smurfit WestRock plc has consistently maintained a Debt-to-Assets ratio, Debt-to-Capital ratio, and Debt-to-Equity ratio of 0.00 over the past four years, indicating that the company has not taken on any debt relative to its assets, capital, or equity during this period. This suggests that the company has been financing its operations primarily through equity and retained earnings rather than through borrowing.
However, the Financial Leverage ratio has shown a slight downward trend from 2.73 in 2020 to 2.27 in 2023. The decreasing trend in the financial leverage ratio indicates that the company's reliance on debt to finance its operations has decreased over the years. A lower financial leverage ratio typically implies lower financial risk and greater solvency, as it suggests that the company has a lower proportion of debt in its capital structure relative to equity.
Overall, based on the solvency ratios analysis, Smurfit WestRock plc appears to have a strong financial position with minimal debt and a decreasing reliance on leverage for funding its operations, which can be seen as a favorable indicator of the company's ability to meet its financial obligations in the long term.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|
| Interest coverage | 7.99 | 10.10 | 8.38 | 6.57 |
Smurfit WestRock plc's interest coverage ratio has shown a fluctuating trend over the past four years. In 2023, the interest coverage ratio stands at 7.99, a decrease from the previous year's ratio of 10.10 in 2022. Despite this decrease, the company's ability to cover its interest expenses remains relatively strong compared to 2020 and 2021, when the ratios were 6.57 and 8.38, respectively.
An interest coverage ratio above 1 indicates that the company is generating sufficient operating income to cover its interest obligations. A ratio of 7.99 in 2023 suggests that Smurfit WestRock plc's operating income is nearly 8 times its interest expenses for the year, affirming the company's financial stability and ability to meet its debt obligations.
While a higher interest coverage ratio is generally preferred by investors and creditors as it indicates a lower risk of default, the fluctuation in Smurfit WestRock plc's interest coverage ratio over the years may warrant further investigation into the company's financial health and the factors influencing its earnings and interest expenses.