Whirlpool Corporation (WHR)

The solvency ratios of Whirlpool Corporation over the past five years indicate its ability to meet its financial obligations.

1. Debt-to-assets ratio: This ratio shows the proportion of the company's assets financed by debt. Whirlpool's Debt-to-assets ratio decreased from 0.25 in 2020 to 0.24 in 2021, increased to 0.43 in 2022, decreased to 0.37 in 2023, and then dropped to 0.29 in 2024. The decreasing trend from 2022 to 2024 suggests that the company is relying less on debt to finance its assets.

2. Debt-to-capital ratio: This ratio indicates the percentage of the company's capital that is financed by debt. Whirlpool's Debt-to-capital ratio decreased from 0.57 in 2020 to 0.50 in 2021, increased to 0.76 in 2022, decreased to 0.73 in 2023, and then dropped to 0.64 in 2024. Though showing some fluctuations, the downward trend from 2022 to 2024 indicates a slight improvement in the company's capital structure.

3. Debt-to-equity ratio: This ratio represents the company's leverage by showing how much of its financing comes from debt compared to equity. Whirlpool's Debt-to-equity ratio decreased from 1.30 in 2020 to 1.02 in 2021, increased significantly to 3.15 in 2022, decreased to 2.72 in 2023, and then fell to 1.77 in 2024. The spike in 2022 suggests a higher reliance on debt, but the subsequent declines show a move towards a more balanced financing structure.

4. Financial leverage ratio: This ratio provides an overall view of the company's leverage, considering all forms of debt. Whirlpool's Financial leverage ratio decreased from 5.26 in 2020 to 4.19 in 2021, increased to 7.33 in 2022 and remained constant in 2023, before dropping to 6.08 in 2024. Similar to the debt-to-equity ratio, the significant increase in 2022 indicates higher leverage, but the subsequent decrease in 2024 suggests a reduction in overall financial risk.

Overall, the trend in solvency ratios for Whirlpool Corporation shows fluctuations but generally indicates improvements in managing debt levels and strengthening its financial position over the five-year period.

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Coverage ratios

The interest coverage ratio is a financial metric that measures a company's ability to pay its interest expenses on outstanding debt. It is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expenses.

In the case of Whirlpool Corporation, the interest coverage ratio has shown fluctuations over the past five years. In December 2020, the interest coverage ratio was 8.71, indicating that the company generated 8.71 times the amount of EBIT needed to cover its interest expenses. This suggests a relatively healthy ability to meet its interest obligations.

By December 2021, Whirlpool's interest coverage ratio improved significantly to 14.15, reflecting a stronger ability to cover its interest costs compared to the previous year. This increase signals an enhanced financial position and lower risk of default due to interest payment issues.

However, in December 2022, the interest coverage ratio of Whirlpool Corporation deteriorated to -5.60. A negative interest coverage ratio indicates that the company's EBIT is insufficient to cover its interest payments, raising concerns about its financial health and ability to service its debt obligations.

The trend continued in December 2023, with an interest coverage ratio of 2.59, which although positive, remains relatively low. This suggests that Whirlpool's ability to meet its interest expenses had improved compared to the previous year but still indicates a level of financial risk.

By December 2024, the interest coverage ratio dropped significantly to 0.40, signaling a further decline in Whirlpool's ability to cover its interest costs. A ratio below 1 indicates that the company's EBIT is inadequate to cover its interest expenses, raising serious concerns about its financial stability and debt repayment capacity.

In conclusion, while Whirlpool Corporation's interest coverage ratio has shown fluctuations over the analyzed period, the negative and declining trends in recent years are a cause for concern, indicating potential financial distress and heightened risk related to debt servicing. Evaluation of the company's overall financial health and debt management strategy is recommended to address these challenges and improve its long-term sustainability.