American Electric Power Co Inc (AEP)

American Electric Power Co Inc's solvency ratios show the following trends over the five-year period from December 31, 2020, to December 31, 2024:

1. Debt-to-assets ratio: This ratio measures the proportion of the company's assets financed by debt. The ratio has been relatively stable, ranging from 0.36 to 0.39 over the period. This indicates that, on average, around 36-39% of the company's total assets are funded by debt.

2. Debt-to-capital ratio: This ratio indicates the amount of financial leverage used by the company to finance its operations. The ratio has also shown consistency, staying in the range of 0.58 to 0.60. This suggests that approximately 58-60% of the company's capital structure is comprised of debt.

3. Debt-to-equity ratio: This ratio reflects the amount of debt relative to shareholders' equity. The ratio has fluctuated slightly, from 1.40 to 1.49, but has remained around 1.40-1.50. This implies that the company's debt level is around 1.40-1.50 times its equity level.

4. Financial leverage ratio: This ratio quantifies the company's overall leverage and risk exposure. The ratio has been consistent, ranging from 3.83 to 3.93. A lower financial leverage ratio indicates lower financial risk, as the company is relying less on debt financing.

In conclusion, based on the solvency ratios analyzed, American Electric Power Co Inc has maintained a relatively stable level of debt in its capital structure over the five-year period, with moderate financial leverage and a consistent proportion of debt compared to assets and equity.

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Coverage ratios

The interest coverage ratio for American Electric Power Co Inc has shown fluctuations over the years, ranging from 1.97 to 33.16. In 2020, the company had an interest coverage of 2.56, indicating that it earned 2.56 times the amount needed to cover its interest expenses. This ratio increased slightly to 2.84 in 2021, suggesting improved ability to meet interest obligations. However, there was a decline in 2022 as the interest coverage dropped to 2.49, which could indicate tighter financial conditions.

The interest coverage ratio experienced a significant spike in 2024, reaching 33.16, which may suggest a notable improvement in the company's ability to cover interest payments during that period. It is essential to pay close attention to the trend in interest coverage over time, as a decreasing ratio could signal potential financial distress, while an increasing ratio signifies better financial health and ability to service debt. The company's management should continue monitoring and managing the interest coverage ratio to ensure financial stability and sustainability.