Allete Inc (ALE)

Allete, Inc.'s liquidity ratios have shown a consistent improvement over the past five years. The current ratio, which measures the company's ability to cover short-term obligations with its current assets, has increased steadily from 0.53 in 2019 to 1.24 in 2023. This indicates that Allete has a healthier liquidity position and is better equipped to meet its short-term liabilities.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also shown significant improvement over the same period. Starting at 0.39 in 2019, the quick ratio has reached 0.78 in 2023. This demonstrates that Allete has a stronger ability to meet its immediate obligations without relying on inventory liquidation.

Moreover, the cash ratio, which provides the most conservative measure of liquidity by considering only cash and cash equivalents to cover current liabilities, has improved consistently from 0.20 in 2019 to 0.41 in 2023. This indicates that Allete has enhanced its ability to settle short-term debts using its readily available cash resources.

Overall, the trend in Allete's liquidity ratios suggests that the company has become increasingly efficient in managing its short-term financial obligations and has enhanced its liquidity position over the years. This improvement reflects positively on the company's financial management practices and its ability to weather potential short-term financial challenges.

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Additional liquidity measure

The cash conversion cycle for Allete, Inc. has exhibited significant fluctuations over the past five years. In 2023, the company's cash conversion cycle was 54.58 days, indicating a moderate amount of time it takes for Allete to convert its investments in inventory into cash receipts from sales. This may suggest that the company is effectively managing its working capital.

On the other hand, the sharp increase in the cash conversion cycle in 2022 to 208.91 days reflects a concerning trend. This spike may be attributed to issues such as inventory management problems, inefficiencies in accounts receivable collections, or delayed payments to suppliers, resulting in a longer cycle and potentially tying up the company's cash flow.

In 2021, the cash conversion cycle decreased to 24.12 days, indicating a swift conversion of raw materials into finished goods and subsequent sales, which is a positive sign for the company's operational efficiency. The significant improvement from 2020, where the cycle was only 4.21 days, suggests enhanced working capital management practices during that year.

Notably, in 2019, Allete achieved a negative cash conversion cycle of -43.20 days, indicating that the company was able to collect cash from customers before paying its suppliers and converting inventories into sales. This is a favorable position as it shows efficient management of working capital and optimal utilization of resources.

Overall, the fluctuations in Allete's cash conversion cycle over the past five years highlight the importance of closely monitoring working capital efficiency to ensure optimal cash flow management and operational performance.