Tapestry Inc (TPR)

The analysis of Tapestry Inc.'s solvency ratios over the specified period indicates a consistent absence of debt across multiple measures. Specifically, the debt-to-assets ratio, debt-to-capital ratio, and debt-to-equity ratio are recorded at zero for each fiscal year from June 30, 2021, through June 30, 2025. This suggests that the company has not employed leverage through debt financing during this timeframe, implying a fully equity-funded capital structure.

In contrast, the financial leverage ratio exhibits a rising trend over the years, increasing from 2.57 as of June 30, 2021, to 7.67 as of June 30, 2025. Despite the absence of traditional debt, this ratio indicates an increasing degree of financial leverage, which may be attributable to other forms of leverage or capital structure nuances not captured solely by debt ratios. The escalation of this ratio over time could reflect changes in the company's equity base relative to its assets or other leverage-influencing factors.

Overall, Tapestry Inc.'s solvency position appears to be characterized by a debt-free balance sheet, with leverage dynamics evolving as reflected in the increasing financial leverage ratio. This might suggest reliance on internal funding or equity financing, with potential implications for the company's capacity to utilize debt for growth or operational flexibility.

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Coverage ratios

The interest coverage ratios for Tapestry Inc over the specified periods demonstrate significant fluctuations, reflecting changes in the company's ability to meet its interest obligations from its earnings before interest and taxes (EBIT). As of June 30, 2021, the interest coverage stood at 13.57, indicating that the company's EBIT was more than thirteen times its interest expenses, signifying a robust capacity to service its debt. This ratio increased substantially to 18.84 by June 30, 2022, further enhancing the company's financial stability and suggesting an improvement in operating profitability or reduction in interest expenses.

The ratio experienced a sharp escalation to 42.42 in the fiscal year ending June 30, 2023, which implies that Tapestry Inc's EBIT was more than forty-two times its interest obligations. Such a high interest coverage ratio indicates an exceptionally strong ability to meet interest payments, which could be attributed to higher earnings, lower interest expenses, or a combination of both. This level of coverage suggests a conservative financial position concerning debt servicing during this period.

However, there is a notable decline observed in the subsequent year, with the interest coverage dropping to 9.10 as of June 30, 2024. While still comfortably above 1.0, this reduction indicates a weakening of the company's capacity to cover interest expenses, possibly due to decreased earnings, increased interest costs, or a strategic shift affecting profitability.

Looking forward, the projected data for June 30, 2025, shows an interest coverage ratio of 0.00. This suggests that, under the current assumptions or forecasted scenario, Tapestry Inc is expected to generate insufficient EBIT to cover its interest expenses entirely, or that interest payments are anticipated to cease entirely. A ratio of zero could also reflect a situation such as debt repayment or restructuring where interest expense might be eliminated.

Overall, the historical data depicts a company that had strong and increasing interest coverage ratios up to 2023, indicating solid financial health during those periods. The subsequent decline raises concerns about deteriorating profitability or increased leverage, warranting further analysis to determine the underlying causes of this downward trend and its implications for the company's financial stability going forward.