American Electric Power Co Inc (AEP)

Interest coverage

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	4,303,600	3,556,200	3,482,700	3,411,300	2,987,700
Interest expense	US$ in thousands	129,800	1,806,900	1,396,100	1,199,100	1,165,700
Interest coverage		33.16	1.97	2.49	2.84	2.56

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $4,303,600K ÷ $129,800K
= 33.16

Based on the interest coverage data provided for American Electric Power Co Inc, we can observe the following trend:

- As of December 31, 2020, the interest coverage ratio was 2.56, indicating that the company generated $2.56 in operating income for every dollar of interest expense.

- By December 31, 2021, the interest coverage ratio improved slightly to 2.84, suggesting a slightly stronger ability to cover interest payments.

- However, by December 31, 2022, the interest coverage ratio declined to 2.49, indicating a slight decrease in the company's ability to cover interest expenses.

- The interest coverage ratio showed a more significant decrease to 1.97 by December 31, 2023, possibly indicating a higher financial risk due to lower operating income relative to interest obligations.

- Notably, by December 31, 2024, the interest coverage ratio spiked to 33.16, which could be due to a significant increase in operating income or a drastic reduction in interest expenses during that period.

In general, a higher interest coverage ratio signifies a better financial position for the company, indicating that it has more than enough earnings to cover interest payments. On the other hand, a lower interest coverage ratio may raise concerns about the company's ability to meet its interest obligations from its operating income. It is essential for stakeholders to monitor this ratio over time to assess the company's financial health and ability to service its debt.