The AES Corporation (AES)
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 | 1,829,000 | 836,000 | 369,000 | 1,300,000 | 1,705,000 |
| Interest expense | US$ in thousands | 1,319,000 | 1,117,000 | 911,000 | 1,038,000 | 1,050,000 |
| Interest coverage | 1.39 | 0.75 | 0.41 | 1.25 | 1.62 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $1,829,000K ÷ $1,319,000K
= 1.39
The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt. A higher ratio indicates a stronger ability to cover interest expenses from operating income. AES Corp.'s interest coverage has shown some variability over the past five years, ranging from 2.71 in 2019 to 4.11 in 2021.
In 2023, AES Corp.'s interest coverage ratio was 2.89, indicating that the company generated operating income 2.89 times its interest expenses for the year. While the ratio decreased compared to the previous year, it remains at a moderate level, suggesting that AES Corp. may have sufficient earnings to cover its interest payments.
It is essential for investors and creditors to monitor AES Corp.'s interest coverage ratio over time to assess the company's financial health and its ability to service its debt obligations. A consistent or improving trend in the interest coverage ratio can indicate a stable financial position, while a declining trend may raise concerns about the company's ability to meet its debt obligations in the future.