Atmos Energy Corporation (ATO)

The solvency ratios of Atmos Energy Corp. provide valuable insights into the company's ability to meet its long-term obligations. Let's analyze each ratio based on the data provided:

1. Debt-to-assets ratio:
The debt-to-assets ratio measures the proportion of a company's assets financed by debt. A lower ratio indicates a lower reliance on debt for financing assets. Atmos Energy Corp.'s debt-to-assets ratio has fluctuated over the past five years, ranging from 0.30 to 0.37, with the latest ratio at 0.31 as of September 30, 2023. This indicates that 31% of the company's assets are financed by debt. The decreasing trend in the ratio suggests that the company has reduced its reliance on debt for asset financing, which can be a positive sign for solvency.

2. Debt-to-capital ratio:
The debt-to-capital ratio compares a company's total debt to its total capital (debt and equity). It provides insights into the proportion of capital financed by debt. Atmos Energy Corp.'s debt-to-capital ratio has also shown fluctuations over the past five years, with the latest ratio at 0.39 as of September 30, 2023. This indicates that 39% of the company's capital is financed by debt. The decreasing trend in this ratio, similar to the debt-to-assets ratio, reflects a reduced reliance on debt for overall capital, which is favorable for long-term solvency.

3. Debt-to-equity ratio:
The debt-to-equity ratio measures the proportion of equity and debt used to finance a company's assets. A lower ratio indicates lower financial risk due to lower dependence on borrowing. Atmos Energy Corp.'s debt-to-equity ratio has also varied over the years, with the latest ratio at 0.63 as of September 30, 2023. This suggests that the company's equity financing exceeds debt financing, which is a positive indicator of long-term solvency. The decreasing trend in the ratio indicates a strengthening financial position in terms of equity versus debt financing.

4. Financial leverage ratio:
The financial leverage ratio compares a company's total assets to its equity, reflecting the level of assets supported by each dollar of equity. Atmos Energy Corp.'s financial leverage ratio has exhibited fluctuations, with the latest ratio at 2.07 as of September 30, 2023. This indicates that for every dollar of equity, the company has approximately $2.07 in total assets. The decreasing trend in the ratio suggests a reduction in financial leverage, which can enhance the company's financial stability and solvency.

In summary, the solvency ratios demonstrate a trend of declining reliance on debt for financing assets and capital, as well as a strengthening balance between equity and debt financing. These trends indicate an improvement in Atmos Energy Corp.'s long-term solvency position, which is a positive signal for its financial health and ability to meet its long-term obligations.

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Coverage ratios

The interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. It is calculated by dividing the EBIT (earnings before interest and taxes) by the total interest expense.

Analyzing Atmos Energy Corp.'s interest coverage ratio over the last five years, we observe a consistent and generally healthy trend. The company's interest coverage ratio has ranged from 7.54 to 11.12 during this period, reflecting a solid ability to cover interest payments from operating income.

The consistently high interest coverage ratios indicate that Atmos Energy Corp. has been generating sufficient earnings to comfortably cover its interest expenses. This is a positive sign of financial stability and indicates a lower risk of defaulting on its debt obligations.

The slight fluctuations in the interest coverage ratio over the years may be attributed to changes in the company's EBIT and interest expenses. However, the ratios consistently remain above 7.5, indicating a robust financial position.

Overall, the trend in Atmos Energy Corp.'s interest coverage ratio demonstrates the company's ability to manage its interest obligations effectively, reflecting sound financial management and a lower risk of insolvency due to debt obligations.