Paramount Global (NASDAQ:PARA)

The financial leverage ratios indicate a notable downward trend over the observed period, signaling a gradual reduction in reliance on debt financing. Specifically, the debt-to-equity ratio decreased substantially from 3.62 in 2018 to 0.69 in 2022, reflecting improved equity capitalization relative to debt. When including operating lease liabilities, a similar pattern is observed, with the ratio falling from 3.62 to 0.76, although the lease liabilities slightly elevated the ratios throughout.

Debt-to-capital and debt-to-assets ratios also demonstrated consistent declines during the period. The debt-to-capital ratio reduced from 0.78 in 2018 to 0.41 in 2022, while factoring in operating lease liabilities, it declined from 0.78 to 0.43. Similarly, the debt-to-assets ratio dropped from 0.46 to 0.27 over the five years, with adjusted figures showing a decrease from 0.46 to 0.30. These trends suggest a strengthening balance sheet with lower proportional debt burdens on both capital and asset bases.

Financial leverage, which measures the total asset base relative to equity, decreased from 7.8 in 2018 to 2.53 in 2022, corroborating the movement toward lower leverage and indicating a significant reduction in financial risk.

Interest coverage ratios fluctuated throughout the observed timeframe. After a decline from 5.78 in 2018 to 4.03 in 2020, the ratio improved markedly to 6.19 by the end of 2021, suggesting an enhanced ability to meet interest obligations. However, this was followed by a sharp decrease to 2.14 in 2022, which may indicate deteriorating earnings or increased interest expenses affecting the company’s capacity to cover interest payments comfortably.

Similarly, the fixed charge coverage ratio followed a comparable pattern, dropping from 4.29 in 2018 to 3.21 in 2020, increasing to 4.57 in 2021, and then declining significantly to 1.72 in 2022. This fluctuation points to variability in the company’s ability to cover fixed financial obligations, with 2022 showing a potential weakening in coverage.

Summary of Key Trends

Over the five-year period, there has been a clear, sustained decrease in leverage ratios, including debt-to-equity, debt-to-capital, and debt-to-assets, reflecting a conscious move towards lower reliance on debt and improved balance sheet strength.

Despite improving leverage metrics, coverage ratios for interest and fixed charges showed less stability, with both experiencing a notable drop in 2022 after recovering in the prior year, indicating potential pressure on earnings or increased financing costs during the most recent period.

Total Debt

The total debt exhibited a significant increase from 2018 to 2019, rising sharply from approximately 10.2 billion USD to around 18.7 billion USD. Thereafter, the level of debt remained relatively stable through 2020 and started to decrease in the subsequent years, declining to about 15.8 billion USD by the end of 2022. This trend suggests an initial period of substantial borrowing followed by gradual deleveraging or repayment of debt in the later years.

Total Paramount Stockholders’ Equity

Stockholders’ equity showed a pronounced growth trajectory throughout the period under review. Starting at roughly 2.8 billion USD in 2018, equity surged markedly to over 13.2 billion USD by the end of 2019 and continued to increase each year, reaching approximately 23.0 billion USD by the end of 2022. This steady increase indicates strong capital accumulation, potentially driven by retained earnings, equity issuances, or asset revaluation.

Debt to Equity Ratio

The debt to equity ratio experienced a dramatic reduction over the period examined. Beginning at a high leverage level of 3.62 in 2018, it declined sharply to 1.42 in 2019 and continued to decrease in the following years, reaching 0.69 by the end of 2022. This consistent downward trend reflects a strengthening capital structure, with the entity reducing reliance on debt financing relative to equity.

Overall Analysis

The financial data reveal a strategic shift in the capital structure from 2018 to 2022. The company initially increased its debt substantially, but subsequently focused on improving its equity base and reducing leverage. The strong growth in stockholders’ equity combined with decreasing debt levels and a falling debt to equity ratio demonstrates enhanced financial stability and potentially a lower risk profile. These trends may indicate improved operational profitability, successful capital management strategies, or shareholder value enhancement efforts over the years analyzed.

The analysis of the financial data over the five-year period reveals notable trends in the company's capital structure and debt management.

Total Debt (including operating lease liability)

There was a significant increase in total debt from 2018 to 2019, rising from 10,152 million US dollars to 20,920 million US dollars. This level remained relatively stable in 2020 at 21,622 million US dollars. Subsequently, total debt exhibited a downward trend over the next two years, decreasing to 19,632 million US dollars in 2021 and further to 17,566 million US dollars in 2022.

Total Stockholders' Equity

Stockholders' equity experienced a substantial increase beginning in 2019. The figure rose sharply from 2,804 million US dollars in 2018 to 13,207 million US dollars in 2019, continuing to grow to 15,371 million US dollars in 2020. This upward trajectory persisted more markedly through 2021 and 2022, reaching 22,402 million US dollars and 23,036 million US dollars, respectively.

Debt to Equity Ratio (including operating lease liability)

The debt to equity ratio decreased considerably over the five-year span. Starting at a high ratio of 3.62 in 2018, it dropped sharply to 1.58 in 2019 and continued to decline to 1.41 in 2020. The ratio fell further in 2021 and 2022, reaching 0.88 and 0.76, respectively. This downward trend indicates an improved leverage position and suggests reduced reliance on debt financing relative to equity.

Overall, the data reflects a period of increased leverage initially in 2019, followed by progressive debt reduction and strengthening of equity. The substantial growth in stockholders' equity combined with decreasing debt levels led to improved solvency and a stronger capital base by the end of 2022. This indicates a strategic shift towards a more conservative capital structure and potentially enhances financial stability and flexibility.

Total debt

The total debt increased significantly from 10,152 million US dollars at the end of 2018 to a peak of 19,733 million US dollars in 2020. Following this peak, the debt level decreased steadily, reaching 15,846 million US dollars by the end of 2022. This indicates a period of rising debt up to 2020, followed by a consistent debt reduction over the subsequent two years.

Total capital

Total capital exhibited a sustained upward trend throughout the period. Starting from 12,956 million US dollars at the end of 2018, it more than doubled, reaching a high of 40,111 million US dollars in 2021 before slightly declining to 38,882 million US dollars in 2022. This suggests a strong capital base growth, with a minor contraction in the last reported year.

Debt to capital ratio

The debt to capital ratio showed a marked improvement over the five-year period, decreasing from 0.78 in 2018 to 0.41 in 2022. This decline reflects a reduction in leverage, indicating a lower reliance on debt financing relative to total capital. The ratio fell consistently year-over-year, with the most notable reductions occurring after 2019.

Total Debt (including operating lease liability)

The total debt exhibited an initial significant increase from 10,152 million US dollars in 2018 to 20,920 million US dollars in 2019. This peak value was slightly surpassed in 2020 with 21,622 million US dollars. Subsequently, total debt demonstrated a declining trend over the next two years, decreasing to 19,632 million US dollars in 2021 and further to 17,566 million US dollars in 2022.

Total Capital (including operating lease liability)

Total capital reflected a notable upward trajectory from 12,956 million US dollars in 2018 to 34,127 million US dollars in 2019, followed by continued growth to 36,993 million US dollars in 2020. This increasing pattern persisted into 2021, reaching 42,034 million US dollars, before experiencing a slight decline to 40,602 million US dollars in 2022.

Debt to Capital Ratio (including operating lease liability)

The debt to capital ratio showed a steady and consistent decrease over the entire period. Starting at a high ratio of 0.78 in 2018, it declined sharply to 0.61 in 2019, further falling to 0.58 in 2020. This downward trend continued through 2021 and 2022, with the ratio reducing to 0.47 and subsequently 0.43, indicating a lowering proportion of debt relative to total capital over these years.

Total Debt

The total debt showed a significant increase from 2018 to 2019, rising from 10,152 million USD to 18,719 million USD. It continued to increase slightly in 2020, reaching 19,733 million USD. However, from 2020 onward, there was a consistent decline in total debt, decreasing to 17,709 million USD in 2021 and further to 15,846 million USD in 2022.

Total Assets

Total assets experienced a notable increase from 21,859 million USD in 2018 to 49,519 million USD in 2019. This upward trend continued moderately over the following years, reaching 52,663 million USD in 2020 and then growing to 58,620 million USD in 2021. In 2022, total assets slightly decreased to 58,393 million USD, showing relative stability compared to the previous year.

Debt to Assets Ratio

The debt to assets ratio steadily declined over the period from 2018 to 2022. It started at 0.46 in 2018, then dropped significantly to 0.38 in 2019 and continued a gradual reduction to 0.37 in 2020. The decline accelerated in 2021 and 2022, with the ratio reaching 0.30 and then 0.27, respectively. This indicates an improving financial leverage position, reflecting lower reliance on debt financing relative to company assets.

Total Debt

The total debt, including operating lease liabilities, experienced an overall increase from 2018 to 2020, rising from 10,152 million USD to a peak of 21,622 million USD. Following this peak, a consistent decline is noted over the next two years, reaching 17,566 million USD by the end of 2022.

Total Assets

Total assets showed significant growth from 21,859 million USD in 2018 to a high of 58,620 million USD in 2021. In 2022, the total assets slightly decreased but remained relatively stable at 58,393 million USD, indicating overall asset growth across the period analyzed.

Debt to Assets Ratio

The debt to assets ratio has steadily declined from 0.46 in 2018 to 0.30 in 2022. This indicates a decreasing reliance on debt financing relative to the company's asset base, reflecting improved leverage management and potentially stronger financial stability over time.

Total assets

The total assets demonstrated a significant increase from 21,859 million USD in 2018 to 49,519 million USD in 2019, showing more than a twofold growth. From 2019 onwards, the assets continued a moderate upward trend, reaching a peak of 58,620 million USD in 2021 before experiencing a slight decline to 58,393 million USD in 2022. Overall, the total asset base expanded substantially over the five-year period, indicating notable growth in resources.

Total Paramount stockholders’ equity

The stockholders’ equity showed a pronounced upward trend throughout the period. Starting at 2,804 million USD in 2018, it surged to 13,207 million USD in 2019, coinciding with the sharp rise in total assets. Equity continued to grow steadily, reaching 22,402 million USD in 2021 and slightly increasing to 23,036 million USD in 2022. This pattern suggests strengthened capital position and possibly successful retention of earnings or capital injections over the years.

Financial leverage

Financial leverage decreased consistently during the observed period. The ratio fell from a very high 7.8 in 2018 to 3.75 in 2019, coinciding with the large increase in equity and total assets. The leverage ratio continued to decline gradually in subsequent years to 3.43 in 2020, 2.62 in 2021, and 2.53 in 2022. This indicates a reduced reliance on debt financing and a stronger equity base relative to liabilities, reflective of improved financial stability and potentially lower financial risk.

The analysis of the financial data reveals distinct trends and notable fluctuations in key financial metrics over the five-year period.

Earnings before interest and tax (EBIT)

The EBIT figures demonstrate variability across the years. Initially, there was a significant increase from 2,700 million US dollars in 2018 to 4,254 million in 2019, suggesting improved operational performance or favorable market conditions. However, this was followed by a slight decline in 2020 to 4,150 million. Subsequently, EBIT rose sharply in 2021, reaching a peak of 6,101 million, indicating strong profitability or operational efficiency during that year. In 2022, EBIT experienced a substantial decline to 1,993 million, which may signal decreased earnings capacity or increased operating challenges.

Interest expense

Interest expense exhibited an upward trend in the initial years, rising from 467 million in 2018 to around 1,031 million in 2020. It then slightly decreased to 986 million in 2021 and further to 931 million in 2022. Despite minor reductions in the last two years, the overall level of interest expense remained elevated relative to 2018, indicating an increased cost of debt or higher debt levels over the period.

Interest coverage ratio

The interest coverage ratio, which measures the ability to service interest expenses from EBIT, showed a declining trend overall. It started at a strong position of 5.78 in 2018, decreased steadily to 4.03 by 2020, then improved to 6.19 in 2021—correlating with the peak in EBIT for that year. However, in 2022 the ratio drastically declined to 2.14, reflecting a reduced capacity to cover interest expenses due to the sharp drop in EBIT combined with still significant interest expenses.

In summary, the data indicates a period of fluctuating operational performance with a peak in profitability in 2021, followed by a marked downturn in 2022. Interest expenses have remained relatively high, and the ability to cover these costs from earnings has weakened substantially in the most recent year. This suggests potential challenges in sustaining profitability and managing debt service obligations moving forward.

Earnings before fixed charges and tax

The earnings before fixed charges and tax exhibited notable fluctuations over the examined period. Starting at 2,912 million US dollars in 2018, the figure increased significantly to 4,660 million in 2019. A slight decline followed in 2020, with earnings recorded at 4,529 million. In 2021, earnings reached a peak of 6,475 million, representing the highest level in the five-year span. However, in 2022, there was a substantial decrease to 2,366 million, the lowest value noted since 2018.

Fixed charges

Fixed charges displayed an overall increasing trend from 2018 to 2022. In 2018, fixed charges were at 679 million US dollars, more than doubling to 1,368 million in 2019. This upward trajectory continued with slight increases to 1,410 million in 2020, 1,416 million in 2021, and a small decline to 1,377 million in 2022. Despite minor fluctuations, the fixed charges remained at a significantly higher level than in 2018 throughout the later years.

Fixed charge coverage ratio

The fixed charge coverage ratio showed variability corresponding to changes in earnings and fixed charges. In 2018, the ratio was relatively strong at 4.29, followed by a decline to 3.41 in 2019 and 3.21 in 2020, indicating a decreasing ability to cover fixed charges from earnings. A recovery occurred in 2021, with the ratio increasing to 4.57, the highest value within the period. However, in 2022 the ratio dropped sharply to 1.72, reflecting a marked reduction in the company’s coverage capacity, likely influenced by the significant decrease in earnings before fixed charges and tax combined with sustained fixed charges.