Alcoa Corp (AA)
Solvency ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 2.73 | 3.33 | 2.91 | 3.22 | 4.49 |
Alcoa Corp's solvency ratios indicate a strong financial position with consistently low debt levels in relation to its assets, capital, and equity over the five-year period from 2020 to 2024. The Debt-to-assets ratio, Debt-to-capital ratio, and Debt-to-equity ratio all remain at 0.00% throughout the period, reflecting that the company's total debt is negligible in comparison to its total assets, capital, and equity.
Further, the Financial leverage ratio, which measures the extent of a company's financial leverage and risk, shows a declining trend over the years, decreasing from 4.49 in 2020 to 2.73 in 2024. This downward trend signifies that the company is relying less on debt financing and increasingly on equity to support its operations, indicating a lower risk of financial distress.
Overall, the solvency ratios of Alcoa Corp demonstrate a conservative approach to managing its debt levels, ensuring a stable and secure financial position that is less susceptible to financial difficulties and insolvency.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | 5.62 | -5.46 | 6.62 | 6.15 | 1.18 |
The interest coverage ratio of Alcoa Corp has shown significant fluctuations over the past five years. In December 2020, the interest coverage ratio was relatively low at 1.18, indicating that the company's ability to cover its interest expenses with its earnings was weak.
However, the situation improved drastically by December 2021, with the interest coverage ratio surging to 6.15. This suggests that Alcoa Corp was in a much healthier financial position, with a stronger ability to meet its interest obligations using its operating profits.
The positive trend continued into December 2022, with the interest coverage ratio further increasing to 6.62. This continued improvement signals that Alcoa Corp was effectively managing its debt and generating sufficient earnings to comfortably cover its interest payments.
However, there was a concerning downturn by December 2023, as the interest coverage ratio dropped to -5.46. A negative interest coverage ratio indicates that the company's earnings were not sufficient to cover its interest expenses, raising red flags about its financial health and ability to service its debt.
Fortunately, by December 2024, the interest coverage ratio recovered to 5.62, showcasing a rebound in Alcoa Corp's ability to cover its interest costs with its earnings. Overall, Alcoa Corp's interest coverage ratio exhibited both strengths and weaknesses over the period, underscoring the importance of closely monitoring this financial metric for insights into the company's financial stability.