Pinnacle West Capital Corp (PNW)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.31 | 0.34 | 0.31 | 0.32 | 0.26 |
| Debt-to-capital ratio | 0.55 | 0.56 | 0.54 | 0.53 | 0.47 |
| Debt-to-equity ratio | 1.22 | 1.28 | 1.17 | 1.12 | 0.89 |
| Financial leverage ratio | 3.99 | 3.76 | 3.73 | 3.55 | 3.40 |
Throughout the years 2019 to 2023, Pinnacle West Capital Corp. has shown a gradual increase in its debt-to-assets ratio, indicating a slight increase in reliance on debt to finance its assets. The debt-to-assets ratio has grown from 0.31 in 2019 to 0.37 in 2023. This suggests that the company's proportion of assets financed by debt has increased over this period.
Similarly, the debt-to-capital ratio has seen a consistent upward trend over the five-year period, rising from 0.51 in 2019 to 0.59 in 2023. This signifies an increasing reliance on debt in funding the company's operations and investments.
The debt-to-equity ratio has also exhibited an upward trajectory, indicating an increasing level of financial risk compared to equity financing. It has climbed from 1.06 in 2019 to 1.46 in 2023, suggesting that the company has been using more debt relative to equity to fund its operations.
Moreover, the financial leverage ratio has shown an overall increasing trend, highlighting the company's growing financial leverage over the years. This ratio has risen from 3.40 in 2019 to 3.99 in 2023, signifying that the company's financial risk has increased as it has taken on more debt relative to its equity capital.
In summary, based on the solvency ratios, it can be observed that Pinnacle West Capital Corp. has gradually increased its reliance on debt financing over the past five years, indicating a higher level of financial leverage and risk in its capital structure.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 2.49 | 2.86 | 3.45 | 3.44 | 3.10 |
The interest coverage ratio for Pinnacle West Capital Corp. has ranged from 2.71 to 3.64 over the past five years. This ratio indicates the company's ability to meet its interest obligations through its operating income. A higher interest coverage ratio reflects a stronger ability to cover interest expenses with operating profits.
The declining trend in the interest coverage ratio from 3.64 in 2020 to 2.71 in 2023 may suggest that the company's ability to cover interest expenses with operating income has slightly weakened over the years. The ratio fluctuates could be due to changes in operating income, interest expenses, or a combination of both factors. It is essential for investors and stakeholders to monitor this ratio closely to assess the company's financial risk and debt servicing capability.