Valvoline Inc (VVV)
Financial leverage ratio
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 2,889,900 | 3,416,800 | 3,191,000 | 3,051,000 | 2,064,000 |
| Total stockholders’ equity | US$ in thousands | 203,200 | 306,600 | 134,500 | -76,000 | -257,800 |
| Financial leverage ratio | 14.22 | 11.14 | 23.72 | — | — |
September 30, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $2,889,900K ÷ $203,200K
= 14.22
The financial leverage ratio is a measure of a company's use of debt to finance its operations and the extent to which it relies on debt rather than equity. The ratio compares a company's total assets to its equity capital and is an indicator of the company's financial risk.
Valvoline Inc's financial leverage ratio has varied over the past few years as seen in the table provided. In 2023, the financial leverage ratio stands at 14.22, which indicates that the company is utilizing debt to finance approximately 14.22 times the amount of equity capital. This suggests that the company has a relatively high level of debt compared to its equity.
In 2022, the financial leverage ratio decreased to 11.14, reflecting a decrease in the company's reliance on debt to finance its assets. This reduction in the ratio may be indicative of the company's efforts to manage its financial risk by decreasing its debt relative to equity.
In 2021, the company's financial leverage ratio was notably higher at 23.64, signaling a significant increase in the utilization of debt to finance its operations. This substantial increase in leverage could indicate a shift in the company's capital structure or a strategic decision to take on more debt to fund growth or investment opportunities.
Notably, data for 2020 and 2019 is not available, which limits the ability to analyze the trend of the financial leverage ratio over a longer period. It's important to note that a high financial leverage ratio can indicate higher financial risk and potential for financial distress, while a lower ratio signifies lower risk and a greater dependence on equity financing.
In conclusion, the financial leverage ratio of Valvoline Inc has fluctuated over the years, indicating varying levels of reliance on debt to finance its operations. It would be important to understand the reasons behind these changes and assess the company's overall financial health and risk management strategies.
Peer comparison
Sep 30, 2023