American Electric Power Co Inc (AEP)

Interest coverage

Dec 31, 2024 Sep 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019
Earnings before interest and tax (EBIT) (ttm) US$ in thousands 4,516,400 4,471,400 3,978,100 3,505,200 3,441,900 3,256,700 3,154,400 3,412,200 3,535,800 3,777,800 3,685,300 3,411,300 3,297,800 3,133,600 3,046,400 2,987,700 2,712,200 2,727,200 2,555,500 2,592,300
Interest expense (ttm) US$ in thousands 125,100 1,865,600 1,826,800 1,806,900 1,740,400 1,630,800 1,498,400 1,396,100 1,305,300 1,248,300 1,222,300 1,199,100 1,183,800 1,171,400 1,163,800 1,165,700 1,168,300 1,152,100 1,108,800 1,072,500
Interest coverage 36.10 2.40 2.18 1.94 1.98 2.00 2.11 2.44 2.71 3.03 3.02 2.84 2.79 2.68 2.62 2.56 2.32 2.37 2.30 2.42

December 31, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $4,516,400K ÷ $125,100K
= 36.10

The interest coverage ratio of American Electric Power Co Inc has shown fluctuations over the period from December 31, 2019, to December 31, 2024. The ratio ranged from a low of 1.94 to a high of 36.10 during this period. This ratio indicates the company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT).

A higher interest coverage ratio is generally preferred as it indicates that the company is better positioned to meet its interest obligations. In contrast, a lower ratio may signal that the company could potentially face challenges in covering its interest expenses.

Looking at the trend, the interest coverage ratio initially increased from 2.42 on December 31, 2019, to a peak of 3.03 on June 30, 2022. However, there was a notable decline in the ratio towards the end of the period, with a significant increase to 36.10 on December 31, 2024.

The significant spike on December 31, 2024, to 36.10 may be an anomaly or an abnormality in the data that warrants further investigation. High fluctuations in the interest coverage ratio can raise concerns for investors and creditors regarding the stability and financial health of the company. Further analysis of the company's financial performance and potential reasons behind such fluctuations would be necessary to accurately assess the company's ability to meet its interest obligations in the long term.