Watsco Inc (WSO)

Watsco Inc.'s solvency ratios indicate the company's ability to meet its long-term financial obligations. Looking at the debt-to-assets ratio over the past five years, it shows a decreasing trend from 0.09 in 2019 to 0.03 in 2023, reflecting a lower reliance on debt to finance the company's assets. This decreasing trend implies a healthier financial position, as the company has lower financial risk associated with its assets.

Similarly, the debt-to-capital ratio has also shown a decrease from 0.14 in 2019 to 0.05 in 2023, indicating that the company has been using less debt relative to its total capital structure. This reduction in the debt-to-capital ratio suggests an improved capital structure and reduced financial leverage for Watsco Inc.

The debt-to-equity ratio has followed a similar decreasing trend, declining from 0.16 in 2019 to 0.06 in 2023. This reduction in the proportion of debt to equity signifies a stronger equity position and reduced financial risk for the company.

Lastly, the financial leverage ratio has shown a decline from 1.78 in 2019 to 1.67 in 2023, indicating that the company has been utilizing less debt to finance its operations. A decreasing financial leverage ratio is generally seen as a positive sign, as it signifies a lower level of financial risk and a more stable financial structure for the organization.

Overall, based on the solvency ratios analyzed, it appears that Watsco Inc. has been effectively managing its debt levels and improving its financial strength and stability over the past five years.

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Coverage ratios

Watsco Inc.'s interest coverage ratio has shown a strong upward trend over the past five years. The ratio stood at 161.55 in 2023, indicating that the company's operating profits were 161.55 times higher than its interest expenses for the year. This demonstrates Watsco's robust ability to meet its interest obligations comfortably.

The significant increase in the interest coverage ratio from 2019 to 2021, reaching a peak of 631.05, suggests that the company's earnings were well above its interest expenses during these years. This indicates a healthy financial position and the ability to cover debt servicing costs efficiently.

While there was a slight decrease in the interest coverage ratio in 2023 compared to 2022, the ratio remains at a high level, reflecting Watsco's continued ability to generate substantial earnings relative to interest payments.

Overall, Watsco Inc.'s consistently high interest coverage ratios over the years indicate a stable and financially sound position, which bodes well for the company's ability to manage its debt and interest obligations effectively.