Allete Inc (ALE)
Solvency ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.25 | 0.25 | 0.24 | 0.27 | 0.26 |
| Debt-to-capital ratio | 0.37 | 0.37 | 0.38 | 0.42 | 0.41 |
| Debt-to-equity ratio | 0.60 | 0.60 | 0.61 | 0.73 | 0.69 |
| Financial leverage ratio | 2.37 | 2.37 | 2.54 | 2.67 | 2.65 |
Allete Inc's solvency ratios indicate its ability to meet long-term financial obligations and manage debt effectively.
1. Debt-to-assets ratio: This ratio shows the proportion of the company's assets financed by debt. Allete Inc's debt-to-assets ratio has been relatively stable, ranging from 0.24 to 0.27 over the past five years. This suggests that around 24% to 27% of the company's assets are funded by debt.
2. Debt-to-capital ratio: The debt-to-capital ratio measures the extent to which a company uses debt to finance its capital structure. Allete Inc's debt-to-capital ratio has fluctuated between 0.37 and 0.42 during the period under review, indicating that debt represents 37% to 42% of the company's total capital.
3. Debt-to-equity ratio: This ratio reflects the company's reliance on debt versus shareholders' equity. Allete Inc's debt-to-equity ratio has shown a decreasing trend from 0.73 in 2021 to 0.60 in 2024. This suggests that the company has been able to reduce its debt relative to equity over the years.
4. Financial leverage ratio: The financial leverage ratio provides insight into the company's financial risk and the extent to which it relies on debt financing. Allete Inc's financial leverage ratio has decreased from 2.67 in 2021 to 2.37 in 2024, indicating a lower dependence on debt to finance its operations.
Overall, Allete Inc's solvency ratios demonstrate a prudent management of debt and financial risk, with a stable or decreasing trend in these ratios over the past five years.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | 1.96 | 4.40 | 3.10 | 3.06 | 2.86 |
The interest coverage ratio measures a company's ability to pay its interest expenses on outstanding debt. A higher ratio indicates a stronger ability to cover interest payments.
Analyzing the interest coverage ratios of Allete Inc over the years:
- As of December 31, 2020, the interest coverage ratio was 2.86, indicating that Allete's earnings before interest and taxes were able to cover its interest expenses nearly 2.9 times.
- By December 31, 2021, the ratio had improved to 3.06, suggesting enhanced ability to cover interest costs compared to the previous year.
- The trend continued positively with the interest coverage ratio rising to 3.10 as of December 31, 2022, indicating further improvement in Allete's ability to meet its interest obligations.
- A significant increase was observed by December 31, 2023, with the interest coverage ratio jumping to 4.40, signifying a substantial enhancement in Allete's capacity to cover interest payments.
- However, by December 31, 2024, the interest coverage ratio decreased to 1.96, indicating a decline in Allete's ability to cover interest expenses compared to the previous year.
Overall, the trend in Allete Inc's interest coverage ratios shows fluctuation over the years, with improvements in some years and a decline in others. It is crucial for the company to consistently maintain a healthy interest coverage ratio to demonstrate its financial stability and ability to meet its debt obligations.