The AES Corporation (AES)

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 0.68 0.83 0.94 1.13 1.18 1.29 1.16 1.07 1.13 1.22 1.28 1.24 1.01 1.02 1.10 1.06 1.03 1.10 1.36 1.34
Quick ratio 0.34 0.46 0.49 0.61 0.62 0.68 0.56 0.52 0.59 0.64 0.66 0.68 0.53 0.57 0.60 0.61 0.60 0.60 0.77 0.77
Cash ratio 0.19 0.26 0.27 0.33 0.32 0.38 0.28 0.26 0.25 0.34 0.34 0.41 0.27 0.33 0.34 0.34 0.28 0.30 0.39 0.41

The liquidity ratios of AES Corp. show a fluctuating trend over the past eight quarters.

The current ratio, which measures the company's ability to cover short-term obligations with current assets, has been on a declining trend, dropping from 1.18 in Q4 2022 to 0.68 in Q4 2023. This indicates a potential risk in meeting short-term liabilities as current assets have decreased relative to current liabilities.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also showcases a similar downward trend, declining from 0.85 in Q4 2022 to 0.49 in Q4 2023. This signifies a reduced ability to cover immediate liabilities without relying on the sale of inventory.

Lastly, the cash ratio, which is the most conservative measure of liquidity as it only considers cash and cash equivalents, shows a diminishing trend from 0.58 in Q4 2022 to 0.35 in Q4 2023. This suggests a decline in the company's ability to cover current obligations solely with cash on hand.

Overall, the decreasing trends in all three liquidity ratios indicate a potential liquidity strain for AES Corp., raising concerns about its ability to meet short-term obligations effectively. Further analysis and monitoring of the company's cash flow management and working capital practices would be advisable.

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 -10.15 19.14 19.81 29.66 30.67 27.17 20.23 24.00 28.71 26.44 23.18 29.37 17.92 21.81 18.64 24.26 19.31 18.76 20.10 24.71

The cash conversion cycle is a key indicator of a company's efficiency in managing its working capital and cash flow. It represents the time it takes for a company to convert its investments in inventory and other resources into cash from sales. A shorter cash conversion cycle typically indicates better liquidity and efficiency in operations.

Analyzing AES Corp.'s cash conversion cycle over the past eight quarters, we observe fluctuations in the company's efficiency in managing working capital and cash flow. In Q4 2023, the cash conversion cycle was negative at -12.49 days, indicating that AES Corp. was able to convert its investments into cash before paying its suppliers. This suggests strong liquidity and efficient management of working capital.

However, in the preceding quarters, Q1 2023, Q2 2023, and Q3 2023, the cash conversion cycle ranged from 19.81 to 29.66 days, reflecting a longer time taken to convert investments into cash. This could imply possible challenges in managing inventory levels, collections, and payment cycles during these periods.

Comparing the Q4 2023 performance to earlier quarters, it appears that AES Corp. has improved its cash conversion cycle significantly. The negative cycle suggests that the company was able to collect cash from customers before paying suppliers and managing inventory efficiently, optimizing its working capital and cash flow.

It is important for AES Corp. to maintain a consistent focus on optimizing its cash conversion cycle to ensure efficient operations and sustainable financial performance in the long term. Monitoring and managing working capital effectively will be crucial for the company to enhance liquidity, profitability, and overall financial health.