Southern Company (SO)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.43 | 0.40 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.65 | 0.64 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 1.89 | 1.80 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 4.43 | 4.44 | 4.58 | 4.39 | 4.32 |
Solvency ratios provide insights into a company's ability to meet its long-term financial obligations. Southern Company's solvency ratios over the past five years show a consistent trend towards slightly increasing leverage.
The debt-to-assets ratio has increased from 0.39 in 2019 to 0.44 in 2023, indicating that 44% of Southern Company's total assets are financed by debt. This suggests a moderate level of reliance on debt to fund its operations and investments.
The debt-to-capital ratio has also shown a slight upward trend, rising from 0.63 in 2019 to 0.66 in 2023. This ratio indicates that 66% of the company's capital structure is comprised of debt, reflecting an increase in leverage over the years.
Similarly, the debt-to-equity ratio has increased steadily from 1.69 in 2019 to 1.97 in 2023. This ratio highlights that for every dollar of equity, Southern Company has $1.97 in debt. This trend suggests an increasing financial risk as the company relies more on debt financing.
The financial leverage ratio, which incorporates both debt and equity components, has also seen a gradual rise over the period, reaching 4.43 in 2023. This ratio reveals that Southern Company's assets are funded roughly four and a half times by debt and equity combined.
In conclusion, Southern Company's solvency ratios indicate a moderate to high level of leverage, with a gradual increase in reliance on debt financing over the past five years. Monitoring these ratios closely is essential to assess the company's ability to meet its long-term financial obligations and manage its capital structure effectively.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 14.07 | 15.79 | 12.62 | 20.27 | 36.15 |
The interest coverage ratio for Southern Company has been showing a declining trend over the past five years. The ratio decreased from 3.18 in 2019 to 2.41 in 2023. This indicates that the company's ability to cover its interest expenses with its operating income has weakened over time. Although the ratio has fluctuated slightly year over year, the overall downward trend raises concerns about the company's ability to meet its interest obligations in the long term. Further analysis of the company's financial performance and cash flow management may be necessary to understand the factors contributing to this declining trend in interest coverage.