A world-leading producer of solar panels, Solaris BV, has enjoyed increased demand for its products in recent years. You are a finance professional who has been asked to perform a thorough analysis of Solaris.

Debt Equity Ratio = Total Debt / Total Equity

2019 = 300.0 / 135.9 = 2.20

2020 = 620.1 / 141.0 = 4.39

Cash Interest Coverage Ratio = (Operating Income + Depreciation) / Interest Expense

2019 = (15.8 + 0.4) / 2.5 = 6.48

2020 = (21.8 + 0.4) / 4.8 = 4.63

The leverage is quite high at 4.39 times in 2020. It has increased a lot from 2019 to 2020 due to the large increase in Total liabilities (total debt).

The cash interest coverage ratio has deteriorated from 2019 to 2020 due to the increased interest expense. The higher interest expense is due to higher long term debt.

Overall, the leverage is high and the cash interest coverage is low. The company should decrease leverage to de-risk the financial position.

THE QUESTION IS - Due to the COVID pandemic, in recent months Solaris has suffered disruption to their earlier positive trend in sales and profitability. The company is therefore in need of additional external financing. Based on your analysis in above, explain how these developments would impact the companys leverage.