Advanced Drainage Systems Inc (WMS)
Financial leverage ratio
| Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 3,268,910 | 2,901,120 | 2,649,760 | 2,413,830 | 2,369,890 |
| Total stockholders’ equity | US$ in thousands | 1,153,310 | 824,147 | 893,039 | 819,784 | 525,723 |
| Financial leverage ratio | 2.83 | 3.52 | 2.97 | 2.94 | 4.51 |
March 31, 2024 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $3,268,910K ÷ $1,153,310K
= 2.83
The financial leverage ratio of Advanced Drainage Systems Inc has shown fluctuations over the past five years, ranging from a low of 2.83 in 2024 to a high of 4.51 in 2020. This ratio indicates the extent to which the company relies on debt to finance its operations and growth.
A higher financial leverage ratio suggests that a company has a higher proportion of debt in its capital structure, which could potentially lead to higher financial risk due to increased interest payments and debt obligations. Conversely, a lower ratio indicates a lower reliance on debt financing and, hence, lower financial risk.
The downward trend in the financial leverage ratio from 4.51 in 2020 to 2.83 in 2024 indicates that Advanced Drainage Systems Inc has been gradually reducing its reliance on debt over the years, which could be a positive sign for investors and creditors. This reduction in leverage may improve the company's financial stability and flexibility in the long run.
Overall, a financial leverage ratio of 2.83 in 2024 suggests that Advanced Drainage Systems Inc's capital structure is primarily funded by equity, with a moderate level of debt. However, it is essential to monitor this ratio periodically to ensure that the company maintains a healthy balance between debt and equity financing to support its growth objectives effectively.