PPL Corporation (PPL)
Interest coverage
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 1,854,000 | 1,590,000 | 1,470,000 | -59,000 | 2,417,000 |
| Interest expense | US$ in thousands | 738,000 | 666,000 | 513,000 | 918,000 | 634,000 |
| Interest coverage | 2.51 | 2.39 | 2.87 | -0.06 | 3.81 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $1,854,000K ÷ $738,000K
= 2.51
The interest coverage ratio for PPL Corporation has shown fluctuation over the years. As of December 31, 2020, the interest coverage ratio was 3.81, indicating that the company earned 3.81 times the amount needed to cover its interest expenses. However, by December 31, 2021, the interest coverage ratio dropped significantly to -0.06, suggesting that the company's earnings were not sufficient to cover its interest expenses during that period.
Subsequently, there was improvement in the interest coverage ratio with a ratio of 2.87 as of December 31, 2022, followed by 2.39 as of December 31, 2023, and 2.51 as of December 31, 2024. While these ratios indicate that earnings were generally able to cover interest expenses during those years, it is important to note that a higher interest coverage ratio is typically preferred as it signifies a lower risk of insolvency due to an inability to meet interest payment obligations.
Overall, PPL Corporation should continue to monitor its interest coverage ratio to ensure that it remains at a comfortable level to meet its financial obligations and maintain financial stability.
Peer comparison
Dec 31, 2024