Axon Enterprise (NASDAQ:AXON) is effectively managing its debt, as indicated by four key measures. These measures show that the company is using debt in a safe and responsible manner.
The first measure is Axon’s debt-to-equity ratio, which stands at a healthy level. This ratio compares a company’s total debt to its total equity, giving insight into its financial health. Axon’s low debt-to-equity ratio suggests that it is not overly reliant on debt to finance its operations.
Secondly, Axon’s interest coverage ratio is another positive indicator. This ratio measures the company’s ability to cover its interest payments with its earnings. A higher interest coverage ratio indicates that a company is in a better position to meet its interest obligations. Axon’s strong interest coverage ratio suggests that it has sufficient earnings to comfortably cover its interest expenses.
The third measure is Axon’s debt-to-EBITDA ratio, which is also at a reasonable level. This ratio compares a company’s debt to its earnings before interest, taxes, depreciation, and amortization. A lower debt-to-EBITDA ratio indicates that a company has less debt relative to its earnings. Axon’s favorable debt-to-EBITDA ratio suggests that it has manageable debt levels.
Lastly, Axon’s current ratio is another key indicator of its debt management. This ratio compares a company’s current assets to its current liabilities, reflecting its short-term liquidity. A higher current ratio indicates that a company has more assets than liabilities, making it more capable of paying off its debts. Axon’s healthy current ratio suggests that it has sufficient assets to meet its short-term obligations.
In conclusion, these four measures demonstrate that Axon Enterprise is using debt safely and responsibly. By maintaining a low debt-to-equity ratio, strong interest coverage ratio, reasonable debt-to-EBITDA ratio, and healthy current ratio, Axon is in a good financial position to manage its debt effectively.