American Water Works (AWK)

Cash ratio

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Cash and cash equivalents	US$ in thousands	96,000	330,000	85,000	116,000	547,000
Short-term investments	US$ in thousands	—	62,000	67,000	17,000	11,000
Total current liabilities	US$ in thousands	3,150,000	2,151,000	2,811,000	2,141,000	2,881,000
Cash ratio		0.03	0.18	0.05	0.06	0.19

December 31, 2024 calculation

Cash ratio = (Cash and cash equivalents + Short-term investments) ÷ Total current liabilities
= ($96,000K + $—K) ÷ $3,150,000K
= 0.03

The cash ratio of American Water Works has been fluctuating over the past five years, ranging from 0.03 to 0.19. In December 31, 2020, the cash ratio was at 0.19, indicating that the company had $0.19 in cash and cash equivalents for every $1 of current liabilities. However, by December 31, 2021, the cash ratio had decreased significantly to 0.06, suggesting a lower level of liquidity. This trend continued into December 31, 2022, with a further decrease to 0.05, indicating a potential strain on the company's ability to meet short-term obligations with its available cash resources.

Interestingly, there was a notable improvement in the cash ratio by December 31, 2023, where it rose to 0.18. This indicates that American Water Works had enhanced its liquidity position compared to the previous year. However, by December 31, 2024, the cash ratio dropped sharply to 0.03, signaling a potential liquidity challenge for the company at the end of that year.

Overall, the fluctuating trend in American Water Works' cash ratio suggests varying levels of liquidity and potential challenges in managing short-term obligations with available cash resources over the five-year period. Further analysis of the company's cash management practices and operational efficiency may be necessary to understand the underlying reasons for these fluctuations and to ensure sustainable liquidity management in the future.