Karooooo (NASDAQ:KARO) has been utilizing debt in a safe manner, as indicated by four key measures. This demonstrates the company’s responsible approach to managing its financial obligations.
The first measure is the company’s debt-to-equity ratio, which stands at a reasonable level compared to its industry peers. This indicates that Karooooo has not taken on excessive debt in relation to its equity.
Secondly, the company’s interest coverage ratio is also healthy, showing that it is able to comfortably meet its interest payments with its operating income. This suggests that Karooooo is not at risk of defaulting on its debt obligations.
Thirdly, the company’s debt-to-EBITDA ratio is another important indicator of its debt management. Karooooo’s ratio is within a manageable range, indicating that it has sufficient earnings to cover its debt payments.
Lastly, the company’s current ratio, which measures its ability to meet short-term obligations, is also in a good position. This suggests that Karooooo has enough current assets to cover its current liabilities, providing a cushion for any unexpected financial challenges.
Overall, these four measures collectively indicate that Karooooo is using debt safely and responsibly. By maintaining a balanced approach to debt management, the company is in a strong financial position to support its growth and operations.