Valvoline Inc (VVV)
Debt-to-capital ratio
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Long-term debt | US$ in thousands | 1,562,300 | 1,525,100 | 1,639,700 | 1,962,000 | 1,327,000 |
| Total stockholders’ equity | US$ in thousands | 203,200 | 306,600 | 134,500 | -76,000 | -257,800 |
| Debt-to-capital ratio | 0.88 | 0.83 | 0.92 | 1.04 | 1.24 |
September 30, 2023 calculation
Debt-to-capital ratio = Long-term debt ÷ (Long-term debt + Total stockholders’ equity)
= $1,562,300K ÷ ($1,562,300K + $203,200K)
= 0.88
The debt-to-capital ratio measures the proportion of a company's capital structure that is financed through debt. A higher ratio indicates a larger proportion of debt in the capital structure, which may indicate higher financial risk.
Looking at the trend of Valvoline Inc's debt-to-capital ratio over the past five years, we can observe a declining trend. In 2019, the ratio was 1.24, indicating that more than 50% of the company's capital was financed through debt. However, the ratio has steadily decreased over the subsequent years, reaching 0.89 in 2023.
This declining trend suggests that Valvoline Inc has been reducing its reliance on debt financing in favor of other sources of capital, such as equity. This can be viewed positively as it indicates a more balanced and sustainable capital structure. Lowering the debt-to-capital ratio can also reduce the company's financial risk and improve its ability to weather economic downturns.
It's important to note that a declining debt-to-capital ratio could potentially indicate that the company is using internally generated funds or equity financing to support its operations and growth, which could be a sign of financial strength.
In conclusion, Valvoline Inc's decreasing debt-to-capital ratio over the past five years indicates a positive trend towards a more conservative capital structure and potentially reduced financial risk. However, it is important to consider additional financial metrics and qualitative factors to gain a comprehensive understanding of the company's overall financial health and risk profile.
Peer comparison
Sep 30, 2023