Constellation Company Solvency Ratios
The solvency ratios are the ratios which are used in the process of assessing the company’s financial health and hence measure the ability to measure the ability to meet the long-term debt and its interest by the company. The different solvency ratios in the company are like the total debt to Equity ratio of Constellation Brands was 1.70 at 2017 and 1.54 in 2016 and 1.57 in 2015. The trend fall from 2015 to 2016 which meant that the company used little of their cash flow interests in paying for their debts in 2016 as compared to 2015. The increase in the debt ratio in 2017 means that there has been an increase in the debt level financing the organization as compared to before which imposes a high risk in their operation as the interest on debt …show more content…
This indicates that the Brown Forman has reduced their Accounts receivable value by acquiring their assets from the creditors as its value reduced by $2millions as compared to that of Constellation which increased by $4.5million which indicates that the later will be in a position of selling their debts in future and also keep more of their creditors (Eastman, 2017).The long-term debt values of the Constellation Company have increased by a margin of 13% in 2017 as compared to 2016 which shows a lower level as compared to the Brown Forman company whose long-term debt increased by 37% in the year 2017 as compared to 2016. this means that Brown Forman are depending more on the debt to finance their operations which may be a bit risky in the long run as they will be required to meet their payments in addition to the debt too. the Net Income values of the Brown Forman company has declined by 37% in 2017 as compared to 2017 which is different from the Net Income values of the Constellation which have improved by 45%.this can be attributed to the increase in the sales of Constellation Brands as compared to Brown which gives an indication that there will be little income for Brown Forman to meet its operations while paying the debts and this will affect their long-term run. (Scheller,2017). the stockholders’ earnings in the Constellation
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