Pinnacle West Capital Corp (PNW)
Solvency ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.31 | 0.31 | 0.34 | 0.31 | 0.32 |
| Debt-to-capital ratio | 0.54 | 0.55 | 0.56 | 0.54 | 0.53 |
| Debt-to-equity ratio | 1.19 | 1.22 | 1.28 | 1.17 | 1.12 |
| Financial leverage ratio | 3.86 | 3.99 | 3.76 | 3.73 | 3.55 |
Pinnacle West Capital Corp's solvency ratios provide insights into the company's ability to meet its long-term financial obligations.
1. Debt-to-assets ratio: This ratio measures the proportion of the company's assets financed by debt. Pinnacle West's debt-to-assets ratio has remained relatively stable over the years, ranging from 0.31 to 0.34. This indicates that around 31% to 34% of the company's assets are funded through debt.
2. Debt-to-capital ratio: The debt-to-capital ratio reflects the percentage of the company's capital structure that is debt-financed. Pinnacle West's debt-to-capital ratio has hovered around 0.54 to 0.56, demonstrating that approximately 54% to 56% of the company's capital is derived from debt financing.
3. Debt-to-equity ratio: This ratio shows the extent to which the company relies on debt versus equity to finance its operations. Pinnacle West's debt-to-equity ratio has varied from 1.12 to 1.28, implying that the company has maintained a debt-heavy capital structure, with debt representing around 112% to 128% of equity.
4. Financial leverage ratio: The financial leverage ratio indicates the company's financial risk due to the level of debt in its capital structure. Pinnacle West's financial leverage ratio has fluctuated between 3.55 to 3.99, suggesting that the company has a moderate to high level of financial leverage, with higher values indicating higher financial risk.
Overall, Pinnacle West Capital Corp's solvency ratios reflect a consistent reliance on debt financing to support its operations, with moderate to high levels of financial leverage. Monitoring these ratios over time can help stakeholders assess the company's ability to manage its debt obligations and make informed investment decisions.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | 2.38 | 2.49 | 2.86 | 3.45 | 3.44 |
Pinnacle West Capital Corp's interest coverage ratio has shown a slight fluctuation over the past five years. As of December 31, 2020, the interest coverage was 3.44, indicating that the company generated operating income 3.44 times more than its interest expenses. This ratio improved marginally to 3.45 by the end of 2021.
However, the interest coverage ratio declined in the subsequent years, reaching 2.86 by December 31, 2022, and further dropping to 2.49 by the end of 2023. This downward trend continued as the interest coverage ratio decreased to 2.38 by December 31, 2024.
Overall, the decreasing trend in the interest coverage ratio over the years suggests that Pinnacle West Capital Corp may be facing challenges in generating sufficient operating income to cover its interest expenses. It is important for the company to monitor and manage its financial performance to ensure that it can comfortably meet its interest obligations in the future. Additional analysis of the company's operating performance, profitability, and debt management may provide further insights into the reasons behind the decreasing interest coverage ratio.