American Water Works (AWK)

American Water Works Co. Inc. has shown fluctuations in its liquidity ratios over the past five years. The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, improved from 0.63 in 2019 to 0.73 in 2021 but decreased to 0.65 in 2023. However, the ratio remains below 1, indicating a potential liquidity risk as the company may not be able to meet its current liabilities with its current assets.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also fluctuated over the years. It increased from 0.31 in 2019 to 0.42 in 2020 but declined to 0.58 in 2023. This indicates that the company may have difficulty meeting its short-term obligations without relying on inventory in certain years.

The cash ratio, which assesses the company's ability to cover its current liabilities with its cash and cash equivalents, has shown improvement over the years. It increased from 0.09 in 2019 to 0.28 in 2023. This suggests that American Water Works Co. Inc. has been building up its cash reserves, which is a positive sign for its liquidity position.

Overall, the liquidity ratios of American Water Works Co. Inc. show a mixed performance over the past five years. While the company has made some improvements in its cash position, the current and quick ratios indicate a potential liquidity challenge in the near term. Monitoring these ratios closely will be important for assessing the company's ability to meet its short-term obligations and manage liquidity risk effectively.

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Additional liquidity measure

The cash conversion cycle for American Water Works Co. Inc. has shown some fluctuations over the past five years. In 2023, the company's cash conversion cycle was 55.26 days, indicating that it took approximately 55 days for the company to convert its investments in inventory and other resources into cash flow from sales and then back into cash or cash equivalents.

Comparatively, the cash conversion cycle was slightly longer in 2022 at 58.62 days, reflecting a slower conversion of investment into cash flow. In 2021, the cycle decreased to 48.20 days, signaling a more efficient management of working capital and quicker conversion of resources into cash.

In 2020, the company experienced a slight increase in the cash conversion cycle to 50.93 days, possibly due to changes in operational efficiency or market conditions. In 2019, the cycle was 47.12 days, showing a relatively efficient conversion of resources into cash flow.

Overall, the trend in the cash conversion cycle for American Water Works Co. Inc. seems to fluctuate, with some years showing improvements in efficiency and others experiencing slight setbacks. Monitoring this metric closely can help the company assess its working capital management and operational effectiveness in converting resources into cash.