Watsco Inc (WSO)

Watsco Inc's solvency ratios indicate a strong financial position with consistently low debt levels in relation to its assets, capital, and equity over the years from 2020 to 2024. The Debt-to-assets ratio, Debt-to-capital ratio, and Debt-to-equity ratio all stand at 0.00 for each year, signifying that the company has no significant debt obligations relative to its total assets, capital structure, and shareholders' equity.

Furthermore, the Financial leverage ratio, which measures the extent to which a company's operations are funded by debt, shows a stable trend ranging from 1.67 to 1.85 over the same period. This suggests that Watsco Inc maintains a conservative capital structure and does not rely heavily on debt financing to support its operations.

Overall, the solvency ratios of Watsco Inc reflect a sound financial strategy focused on maintaining a healthy balance sheet and effectively managing its debt levels, contributing to the company's ability to weather financial challenges and capitalize on strategic opportunities.

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Coverage ratios

Watsco Inc's interest coverage ratio has exhibited significant fluctuations over the past five years. The interest coverage ratio measures the company's ability to meet its interest obligations with its earnings before interest and taxes (EBIT).

At the end of 2020, the interest coverage ratio stood at a robust 323.68, indicating that the company's EBIT was more than sufficient to cover its interest expenses. The ratio improved even further by the end of 2021, reaching 631.05, suggesting a strong financial position and minimal financial risk related to interest payments.

However, the interest coverage ratio declined notably by the end of 2022 to 384.10, indicating a potential decrease in EBIT relative to its interest obligations. This trend continued as the ratio decreased to 161.55 by the end of 2023, signaling a potential increase in financial risk associated with interest payments.

By the end of 2024, the interest coverage ratio dropped significantly to 36.00, suggesting a substantial deterioration in the company's ability to cover its interest expenses with its operating income. This substantial decrease raises concerns about the company's financial health and its ability to meet its debt obligations comfortably.

Overall, the fluctuating trend in Watsco Inc's interest coverage ratio raises flags about the company's financial stability and suggests a need for closer monitoring of its debt management and overall financial performance.