UGI Corporation (UGI)
Financial leverage ratio
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 15,401,000 | 17,575,000 | 16,723,000 | 13,985,000 | 13,347,000 |
| Total stockholders’ equity | US$ in thousands | 4,386,000 | 6,066,000 | 5,522,000 | 4,128,000 | 3,817,000 |
| Financial leverage ratio | 3.51 | 2.90 | 3.03 | 3.39 | 3.50 |
September 30, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $15,401,000K ÷ $4,386,000K
= 3.51
The financial leverage ratio measures the extent to which a company uses debt to finance its operations and assets. A higher financial leverage ratio indicates a higher degree of financial leverage, implying that the company relies more on debt financing.
Looking at UGI Corp.'s financial leverage ratio over the past five years, we can observe some fluctuations. In 2019, the ratio stood at 3.50, indicating a relatively high level of financial leverage. However, in 2020, there was a slight decrease in the ratio to 3.39, suggesting a reduction in the company's reliance on debt for financing.
Subsequently, in 2021, the financial leverage ratio decreased further to 3.03, signaling a continued trend of lower reliance on debt financing. However, the ratio increased in 2022 to 2.90, before rising notably in 2023 to 3.51.
The significant increase in the financial leverage ratio in 2023 may indicate that UGI Corp. has increased its reliance on debt to finance its operations and assets. This could be due to various factors such as strategic acquisitions, capital expansion, or refinancing activities.
It is essential to note that a high financial leverage ratio can magnify the company's financial risk, as it would be more susceptible to interest rate fluctuations and potential financial distress. On the other hand, a lower financial leverage ratio signifies a more conservative approach to financing, reducing the risk of financial instability.
Overall, UGI Corp.'s financial leverage ratio has shown fluctuation over the years, indicating varying levels of reliance on debt financing. As an analyst, it would be important to assess the reasons behind these fluctuations and evaluate the potential implications for the company's financial risk and stability.
Peer comparison
Sep 30, 2023