American States Water Company (AWR)

Financial leverage ratio

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Total assets	US$ in thousands	2,246,120	2,034,370	1,900,980	1,791,600	1,641,330
Total stockholders’ equity	US$ in thousands	776,109	709,549	685,947	641,673	601,530
Financial leverage ratio		2.89	2.87	2.77	2.79	2.73

December 31, 2023 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $2,246,120K ÷ $776,109K
= 2.89

The financial leverage ratio of American States Water Co. has been gradually increasing over the past five years, from 2.73 in 2019 to 2.89 in 2023. This indicates that the company has been relying more on debt to finance its operations and investments relative to its equity over this period.

A financial leverage ratio above 1 suggests that the company is using more debt financing than equity financing, which can magnify profits through leverage but also increase financial risk. A higher financial leverage ratio typically means higher financial risk for the company, as it becomes more vulnerable to changes in interest rates and potential financial distress if not managed effectively.

It is important for investors and stakeholders to monitor the trend of the financial leverage ratio over time, as a consistently increasing ratio may raise concerns about the company's ability to meet its debt obligations and overall financial health. Additionally, it is essential for management to strike a balance between debt and equity financing to maintain optimal capital structure and mitigate financial risks.