American Electric Power Co Inc (AEP)

American Electric Power Co Inc's liquidity ratios have shown some fluctuation over the years.

1. Current Ratio: The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has ranged from 0.44 to 0.63 over the past five years. While the ratio improved in 2021, it decreased in subsequent years, indicating a potential challenge in meeting short-term obligations.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent assessment of liquidity by excluding inventory from current assets. American Electric Power Co Inc's quick ratio ranged from 0.23 to 0.29 during the period under review, reflecting a limited ability to cover immediate liabilities with liquid assets.

3. Cash Ratio: The cash ratio, which represents the proportion of current liabilities that can be covered by cash and cash equivalents, has remained relatively stable, ranging from 0.03 to 0.06. This suggests that the company may have a lower level of cash resources compared to its current liabilities.

Overall, the liquidity ratios indicate that American Electric Power Co Inc may face challenges in meeting its short-term obligations, especially in periods when the ratios are towards the lower end of the range. It is important for the company to closely monitor its liquidity position and take proactive measures to ensure sufficient liquidity to support its operations.

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Additional liquidity measure

American Electric Power Co Inc's cash conversion cycle has exhibited significant fluctuations over the years. The company reported a negative cash conversion cycle of -56.74 days as of December 31, 2020, indicating that it was able to convert its investments in inventory and receivables into cash relatively quickly during that period.

However, in the following years, the cash conversion cycle expanded dramatically, reaching -228.34 days as of December 31, 2021, and further deteriorating to -265.93 days by December 31, 2022. These negative figures suggest that the company took a longer time to convert its investments into cash and may have faced challenges in managing its working capital efficiently during these periods.

The trend reversed in the subsequent years, with the cash conversion cycle turning positive. By December 31, 2023, the company reported a cash conversion cycle of 14.58 days, indicating an improvement in its ability to convert investments into cash. This positive trend continued as of December 31, 2024, with the cash conversion cycle further reducing to 0.71 days, signaling that the company was managing its working capital more effectively and converting investments into cash at a faster pace.

Overall, the fluctuations in American Electric Power Co Inc's cash conversion cycle reflect changes in its working capital management efficiency over the years, with periods of improvement and deterioration. It is important for the company to continue monitoring and optimizing its cash conversion cycle to ensure efficient utilization of its resources and maintain healthy liquidity levels.