Strategic Debt Burden Assessment and Financial Sustainability Analysis of Diageo
DOI:
https://doi.org/10.46991/BYSU.G.2026.17.1.055Keywords:
capital structure, Diageo plc, permanent debtor model, asset-based lending, TBC ratio, financial sustainability, premiumizationAbstract
The global alcoholic beverage industry represents a sophisticated intersection of agricultural supply chains and long-cycle manufacturing, where high-intensity branding meets unique asset structures. This study evaluates the financial sustainability of Diageo PLC from 2014 to 2025, moving beyond descriptive accounting to analyze the "Permanent Debtor" model inherent in the spirits industry. Utilizing a structured methodology of three indicator groups (Capital Structure, Asset Security, and Operational Servicing), the research finds that while Diageo’s leverage ratios (G1.1 > 2.0) appear high by conventional standards, they are fundamentally secured by the appreciation of maturing inventory. The study’s key contribution is the identification of a "safety margin" where the retail value appreciation of aged spirits outpaces the cost of debt, providing a strategic blueprint for debt management in asset-heavy industries. The analysis also introduces the Times Burden Covered (TBC) ratio to provide a more rigorous assessment of solvency than standard interest coverage ratios.
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