American Electric Power Company Inc (AEP)

Interest coverage

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Earnings before interest and tax (EBIT)	US$ in thousands	3,556,200	3,482,700	3,411,300	2,987,700	2,592,300
Interest expense	US$ in thousands	1,806,900	1,396,100	1,199,100	1,165,700	1,072,500
Interest coverage		1.97	2.49	2.84	2.56	2.42

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $3,556,200K ÷ $1,806,900K
= 1.97

American Electric Power Company Inc.'s interest coverage ratio has exhibited some variability over the past five years. The interest coverage ratio measures the company's ability to meet its interest obligations on its debt. A higher interest coverage ratio indicates a stronger ability to cover interest payments with operating income.

From 2019 to 2021, the interest coverage ratio showed a steady increase, reaching its peak at 2.93 in 2021. This improvement suggests that the company was generating more operating income relative to its interest expenses during this period. However, in 2022 and 2023, the interest coverage ratio declined to 2.60 and 2.10, respectively.

While the ratio in 2023 remains above 1, indicating that the company's operating income is still sufficient to cover its interest expenses, the decreasing trend in recent years raises some concerns about the company's ability to comfortably meet its interest obligations in the future. It would be important for stakeholders to closely monitor this trend and assess the company's debt management strategies to ensure financial stability in the long term.