American Electric Power Company Inc (AEP)
Liquidity ratios
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 0.53 | 0.60 | 0.61 | 0.62 | 0.51 | 0.79 | 0.75 | 0.61 | 0.63 | 0.58 | 0.44 | 0.42 | 0.44 | 0.48 | 0.42 | 0.45 | 0.40 | 0.48 | 0.49 | 0.49 |
| Quick ratio | 0.29 | 0.32 | 0.25 | 0.26 | 0.28 | 0.30 | 0.28 | 0.23 | 0.23 | 0.42 | 0.29 | 0.27 | 0.29 | 0.30 | 0.25 | 0.32 | 0.23 | 0.31 | 0.28 | 0.31 |
| Cash ratio | 0.05 | 0.05 | 0.04 | 0.04 | 0.05 | 0.06 | 0.06 | 0.07 | 0.05 | 0.16 | 0.05 | 0.05 | 0.06 | 0.07 | 0.05 | 0.15 | 0.04 | 0.06 | 0.05 | 0.05 |
American Electric Power Company Inc.'s liquidity ratios, as represented by the current ratio, quick ratio, and cash ratio, have shown a declining trend over the past eight quarters.
The current ratio, which measures the company's ability to cover its short-term obligations with its short-term assets, decreased from 0.65 in Q4 2022 to 0.53 in Q4 2023. This indicates a weakening ability to meet its current liabilities with its current assets.
The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also exhibited a downward trend over the same period. It declined from 0.36 in Q4 2022 to 0.36 in Q4 2023, reflecting a reduced capacity to pay off current obligations without relying on inventory.
Likewise, the cash ratio, which assesses the company's ability to cover its short-term liabilities with its cash and cash equivalents, decreased from 0.18 in Q4 2022 to 0.15 in Q4 2023. This suggests a dwindling ability to settle immediate obligations using its available cash reserves.
The declining trend in all three liquidity ratios indicates potential challenges for American Electric Power Company Inc. in meeting its short-term financial obligations. Further analysis and monitoring of the company's liquidity position are recommended to assess the potential impact on its financial health and operational stability.
Additional liquidity measure
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -19.89 | -163.06 | -247.23 | -245.47 | -431.29 | -370.24 | -380.27 | -264.54 | -417.43 | -213.50 | -145.57 | -150.54 | -135.25 | -125.91 | -108.80 | -134.91 | -390.30 | -210.32 | -202.76 | -39.59 |
The cash conversion cycle of American Electric Power Company Inc. has been fluctuating over the past 8 quarters. In Q4 2023, the company's cash conversion cycle increased to 38.57 days from 19.67 days in Q3 2023. This indicates that it took the company nearly 39 days to convert its investments in inventory and other resources into cash receipts from customers.
The significant increase in the cash conversion cycle from Q1 2023 to Q4 2023 suggests that the company may be facing challenges in managing its working capital efficiently. It took the company 38.57 days in Q4 2023, compared to 2.02 days in Q1 2023, to convert its resources into cash. This may indicate potential delays in collecting payments from customers or increased inventory levels.
Looking back at the trend over the past 8 quarters, the company's cash conversion cycle has shown both positive and negative values. Negative values indicate that the company was able to convert its resources into cash more quickly than its payment obligations, which can be seen in Q4 2022, Q3 2022, and Q2 2022. However, in Q1 2023 and Q4 2023, the cash conversion cycle turned positive, indicating a potential slowdown in cash inflows relative to cash outflows.
Overall, a significantly higher cash conversion cycle in Q4 2023 compared to previous quarters may raise concerns about the company's liquidity and efficiency in managing its working capital. It is important for the company to closely monitor and improve its cash conversion cycle to ensure optimal cash flow management and financial health.