UGI Corporation (UGI)

The solvency ratios of UGI Corp. provide insights into the company's ability to meet its long-term obligations and leverage its capital structure effectively. Let's analyze the trends and implications of these ratios over the past five years.

Debt-to-assets ratio:
UGI Corp.'s debt-to-assets ratio has shown an increasing trend from 2019 to 2023, reaching 0.47 in 2023. This indicates that the company's proportion of debt to its total assets has been on the rise. While an increasing trend can raise concerns about the company's ability to cover its debt obligations, it's essential to consider the industry norms and the company's overall financial health.

Debt-to-capital ratio:
Similarly, UGI Corp.'s debt-to-capital ratio has also exhibited a rising trend, reaching 0.62 in 2023. This ratio suggests that a significant portion of the company's capital is sourced from debt, which may heighten its financial risk. However, it's important to assess this ratio in conjunction with the company's ability to generate returns that exceed the cost of debt.

Debt-to-equity ratio:
The debt-to-equity ratio has surged from 1.15 in 2019 to 1.65 in 2023, indicating a substantial increase in the company's reliance on debt financing relative to equity. This trend may signal a growing financial risk, as a higher debt-to-equity ratio implies a larger debt burden relative to shareholders' equity.

Financial leverage ratio:
UGI Corp.'s financial leverage ratio has consistently been above 3 over the past five years, reaching 3.51 in 2023. This high leverage ratio suggests that the company relies heavily on debt to finance its operations, which can magnify both profits and losses.

Overall, UGI Corp.'s solvency ratios indicate a trend of increasing reliance on debt financing over the years, raising concerns about the company's financial risk and ability to cover its long-term obligations. Investors and stakeholders should monitor the company's debt management strategies and profitability to assess its long-term solvency and financial stability.

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Coverage ratios

The interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. A higher interest coverage ratio indicates that the company is more capable of meeting its interest obligations.

Looking at UGI Corp.'s interest coverage ratio over the past five years, we can see fluctuations in its ability to cover interest expenses.

In 2023, the interest coverage ratio is negative (-1.96), indicating that UGI Corp.'s earnings before interest and taxes (EBIT) are insufficient to cover its interest expenses. This may raise concerns about the company's ability to meet its debt obligations from its operating income.

In 2022, UGI Corp. had a healthy interest coverage ratio of 5.06, reflecting a strong ability to cover interest payments from its EBIT. This suggests that the company's earnings were more than five times its interest expenses, portraying a favorable financial position.

In 2021, the interest coverage ratio improved significantly to 7.69, indicating a further increase in UGI Corp.'s ability to cover its interest payments. This suggests the company's improved capacity to service its debt through its operating income.

In 2020, UGI Corp.'s interest coverage ratio was 3.35, indicating a moderate ability to cover interest expenses from its EBIT. Although this is lower than the previous year, it still demonstrates an ability to meet debt obligations.

In 2019, the interest coverage ratio was 2.52, showing a lower ability to cover interest expenses compared to the subsequent years but still signifying the company's ability to meet its debt obligations.

Overall, the fluctuation in UGI Corp.'s interest coverage ratio over the years indicates varying levels of capability to cover interest payments from its operating income. The negative interest coverage ratio in 2023 raises concerns, while the positive ratios in the previous years demonstrate the company's ability to manage its debt obligations. It is essential for UGI Corp. to focus on improving its earnings relative to its interest expenses to ensure its financial stability.