AeroVironment Inc (AVAV)

The analysis of AeroVironment Inc.’s solvency ratios over the period from April 30, 2021, to April 30, 2025, reveals significant insights into its financial structure and leverage position.

The debt-to-assets ratio, debt-to-capital ratio, and debt-to-equity ratio all consistently stand at 0.00 across all analyzed periods. This indicates that the company has not employed any debt financing during this timeframe, and its capital structure is entirely equity-based. Such a position suggests an absence of leverage, reliance on internal funds, and a conservative approach to debt management.

Conversely, the financial leverage ratio remains above 1 throughout the period, starting at 1.52 in 2021 and gradually decreasing to 1.23 by 2024, before slightening to 1.26 in 2025. This ratio measures the extent to which the company's assets are financed through equity versus debt. Given that the debt ratios are zero, the leverage ratio above 1 implies that the company’s assets are financed predominantly through equity, and the ratio alteration reflects operational or asset base changes rather than debt utilization.

Overall, AeroVironment Inc. demonstrates a conservative capital structure characterized by zero reliance on debt, which minimizes financial risk associated with leverage. The stability of the debt-related ratios confirms a debt-free status, while the fluctuating but relatively stable financial leverage ratio indicates that the company maintains a stable, predominantly equity-financed asset base over the examined period.

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Coverage ratios

The interest coverage ratio for AeroVironment Inc. over the specified periods demonstrates significant fluctuations, reflecting variability in the company's ability to meet its interest obligations through its earnings before interest and taxes (EBIT).

As of April 30, 2021, the interest coverage ratio was notably high at 56.61, indicating that the company generated sufficient earnings to comfortably cover its interest expenses, suggesting robust financial health and a strong capacity to service debt during that period.

However, by April 30, 2022, the ratio declined sharply to -2.52, transitioning into negative territory. A negative interest coverage ratio implies that the company's earnings before interest and taxes were insufficient to cover interest expenses, signaling potential financial stress, reduced profitability, or extraordinary expenses that adversely affected earnings. This trend continued into April 30, 2023, with the ratio worsening to -19.11, indicating a further deterioration in the company's ability to meet interest obligations solely from operating earnings.

Moving into April 30, 2024, the ratio improved significantly to 15.82, suggesting a notable recovery in the company's earnings capacity, restoring its ability to cover interest expenses comfortably. This positive movement indicates a turnaround in profitability or reduction in interest costs, contributing to improved financial stability.

Finally, as of April 30, 2025, the ratio stands at 0.00, implying that the company's earnings before interest and taxes are equal to zero. This situation suggests that the company is neither generating operational income sufficient to cover interest, nor is it incurring interest expenses that would be covered—potentially indicating a break-even operational position or extraordinary circumstances affecting earnings.

Overall, the fluctuating interest coverage ratios highlight periods of both strong financial health and financial strain for AeroVironment Inc. These changes underscore the importance of examining underlying factors such as earnings volatility, interest expense levels, and operational performance to accurately assess the company's financial resilience over time.