The AES Corporation (AES)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| 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 | 18.01 | 15.74 | 11.78 | 13.14 | 11.23 |
The solvency ratios of AES Corp. provide insight into the company's ability to meet its long-term financial obligations.
1. Debt-to-assets ratio: This ratio indicates the proportion of the company's assets that are financed through debt. The trend shows a slight increase from 0.57 in 2021 to 0.60 in 2023, indicating that the company has increased its reliance on debt financing to fund its assets.
2. Debt-to-capital ratio: This ratio measures the extent to which a company is funded by debt relative to its total capital, including both debt and equity. The increase from 0.87 in 2021 to 0.92 in 2023 reflects a higher proportion of debt in the company's capital structure.
3. Debt-to-equity ratio: This ratio compares the company's total debt to its total equity, indicating the level of financial risk borne by equity shareholders. The significant increase in this ratio from 6.68 in 2021 to 10.80 in 2023 suggests that the company is relying more on debt financing relative to equity.
4. Financial leverage ratio: This ratio measures the company's financial leverage by comparing its total assets to its equity. The increase in this ratio from 11.78 in 2021 to 18.01 in 2023 indicates a higher level of financial risk and reliance on debt financing.
Overall, the trend in AES Corp.'s solvency ratios demonstrates a shift towards higher debt levels in its capital structure and increased financial risk. This may raise concerns about the company's ability to service its debt obligations, especially if economic conditions deteriorate. Investors and stakeholders should closely monitor these solvency ratios to assess the company's long-term financial health and stability.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 1.39 | 0.75 | 0.41 | 1.25 | 1.62 |
Interest coverage ratio measures a company's ability to meet its interest expenses using its operating income. A higher interest coverage ratio indicates that the company is more capable of servicing its interest payments.
Looking at the trend of AES Corp.'s interest coverage ratio over the past five years, we can observe fluctuations in the ratio. In 2021, the interest coverage ratio was at its highest at 4.11, indicating a strong ability to cover interest payments. However, in the subsequent years, the ratio decreased slightly to 3.12 in 2020, improved in 2022 to 3.12, and then decreased again to 2.89 in 2023.
The fluctuation in the interest coverage ratio may signal changes in AES Corp.'s operating income and the level of its interest expenses. A downward trend in the ratio could raise concerns about the company's ability to comfortably meet its interest obligations, especially if operating income fluctuates significantly.
Overall, it is essential for AES Corp. to closely monitor its interest coverage ratio and ensure that it maintains a healthy level to sustain its financial stability and meet its debt obligations effectively.