Exelon Corporation (EXC)

Exelon Corporation's solvency ratios indicate its ability to meet its long-term financial obligations and the extent of its reliance on debt financing.

1. Debt-to-assets ratio: This ratio decreased from 0.27 in 2020 to 0.23 in 2021 before increasing to 0.37 in 2022 and further to 0.39 in 2023. In 2024, the ratio notably dropped to 0.00, signaling a significant reduction in debt in relation to total assets. Generally, a lower debt-to-assets ratio suggests lower financial risk and greater asset coverage.

2. Debt-to-capital ratio: The trend in this ratio mirrors that of the debt-to-assets ratio. It decreased from 0.52 in 2020 to 0.47 in 2021 before rising to 0.59 in 2022 and further to 0.61 in 2023. The ratio dramatically decreased to 0.00 in 2024, indicating a significant reduction in debt relative to total capital. A lower debt-to-capital ratio implies lower leverage and a stronger financial position.

3. Debt-to-equity ratio: This ratio decreased from 1.08 in 2020 to 0.89 in 2021, followed by an increase to 1.43 in 2022 and further to 1.54 in 2023. In 2024, the ratio dropped to 0.00, showing a substantial reduction in debt relative to equity. A lower debt-to-equity ratio points towards lower financial risk and better solvency as equity provides a cushion for creditors.

4. Financial leverage ratio: The financial leverage ratio remained relatively stable around 3.9 in the years 2020 to 2023. In 2024, it increased slightly to 4.00. A higher financial leverage ratio indicates a higher proportion of debt in the company's capital structure.

Overall, Exelon Corporation demonstrated a mixed performance in terms of solvency ratios, with a notable decrease in debt ratios in 2024, suggesting improved solvency and reduced reliance on debt financing. However, it is essential to consider the context and industry benchmarks when interpreting these ratios for a comprehensive assessment of the company's financial health.

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Coverage ratios

Interest coverage is a financial ratio that indicates a company's ability to meet its interest payments on outstanding debt. Exelon Corporation's interest coverage has shown an increasing trend over the years, starting at 1.36 in December 31, 2020 and steadily improving to 17.21 by December 31, 2024.

The interest coverage ratio of 1.36 in 2020 suggests that Exelon's operating income was only sufficient to cover its interest expenses 1.36 times over. However, the significant enhancement in this ratio to 17.21 in 2024 indicates a substantial improvement in the company's ability to cover its interest obligations comfortably.

This rising trend in interest coverage reflects positively on Exelon's ability to generate enough operating income to meet its interest payments and suggests a strengthening financial position over the years. A higher interest coverage ratio is typically viewed favorably by investors and creditors as it indicates a lower risk of defaulting on debt obligations.