American Water Works (AWK)

Solvency ratios are crucial indicators of a company's ability to meet its long-term financial obligations. Analyzing American Water Works Co. Inc.'s solvency ratios reveals important insights into its financial health over the past five years.

1. Debt-to-assets ratio: American Water Works has shown a consistent improvement in its debt-to-assets ratio, decreasing from 0.45 in 2022 to 0.41 in 2023. This indicates that the company has succeeded in lowering its dependence on debt to finance its assets, which is a positive sign for long-term sustainability.

2. Debt-to-capital ratio: The trend in American Water Works' debt-to-capital ratio has been fluctuating slightly over the five-year period, with a decrease from 0.62 in 2022 to 0.56 in 2023. This ratio indicates the proportion of total capital structure financed by debt, and the decreasing trend suggests the company is relying less on debt for capital financing.

3. Debt-to-equity ratio: The company's debt-to-equity ratio has shown some volatility, peaking at 1.70 in 2020 and decreasing to 1.26 in 2023. Although there has been some improvement in recent years, the ratio remains relatively high, indicating that American Water Works relies heavily on debt to finance its operations compared to equity.

4. Financial leverage ratio: American Water Works' financial leverage ratio has exhibited a downward trend, declining from 3.84 in 2020 to 3.09 in 2023. This ratio measures the company's reliance on debt to support its operations and investments. The decreasing trend indicates improved financial stability and reduced risk associated with high leverage.

Overall, American Water Works Co. Inc. has made progress in managing its solvency ratios over the past five years, with a reduction in its reliance on debt financing evident in various ratios. However, the company's high debt-to-equity ratio suggests that it should continue efforts to better balance its capital structure for long-term financial sustainability.

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Coverage ratios

American Water Works Co. Inc.'s interest coverage ratio has shown a generally positive trend over the past five years, ranging from 3.00 in 2021 to 3.89 in 2023. This indicates the company's ability to meet its interest obligations with its operating income. A higher interest coverage ratio suggests that the company is more capable of servicing its debt, as it has a larger buffer to cover interest payments. However, it's important to note that the ratio fluctuated slightly over the years, with a peak in 2023. This fluctuation may be influenced by changes in the company's operating income and interest expenses. Overall, the trend suggests that American Water Works Co. Inc. has maintained a reasonable level of financial health in terms of its ability to cover interest payments.