American Water Works (AWK)
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 | 0.65 | 1.03 | 1.13 | 0.71 | 0.44 | 0.48 | 0.59 | 0.52 | 0.73 | 0.86 | 0.92 | 0.60 | 0.66 | 0.87 | 0.90 | 0.65 | 0.63 | 0.54 | 0.56 | 0.32 |
| Quick ratio | 0.52 | 0.83 | 0.92 | 0.52 | 0.31 | 0.34 | 0.44 | 0.36 | 0.30 | 0.36 | 0.37 | 1.14 | 1.11 | 1.41 | 0.51 | 0.37 | 0.26 | 0.42 | 0.44 | 0.25 |
| Cash ratio | 0.18 | 0.40 | 0.49 | 0.15 | 0.05 | 0.05 | 0.06 | 0.05 | 0.05 | 0.04 | 0.04 | 0.94 | 0.92 | 1.16 | 0.27 | 0.20 | 0.03 | 0.07 | 0.05 | 0.03 |
American Water Works Co. Inc.'s liquidity ratios, namely the current ratio, quick ratio, and cash ratio, have shown some fluctuations over the past eight quarters.
The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has ranged from a low of 0.44 in Q4 2022 to a high of 1.13 in Q2 2023. The ratio has shown some volatility, with Q4 2022 and Q4 2023 indicating potential liquidity challenges given ratios below 1, while the ratios in Q2 and Q3 2023 suggest an improvement in short-term liquidity.
The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has followed a similar trend, fluctuating between 0.40 in Q4 2022 to 1.05 in Q2 2023. Again, the quick ratio below 1 in Q4 2022 and Q4 2023 raises concerns about the company's ability to meet its short-term obligations without relying on inventory liquidation.
The cash ratio, which represents the company's ability to cover its current liabilities with cash and cash equivalents, has generally been lower than the current and quick ratios. The cash ratio has shown improvement over the quarters, moving from 0.12 in Q3 2022 to 0.66 in Q2 2023. However, the ratio remains below 1, indicating that American Water Works Co. Inc. may need to rely on sources other than cash to meet its short-term obligations.
Overall, while there have been fluctuations in the liquidity ratios of American Water Works Co. Inc. over the past eight quarters, the company should continue to closely monitor its liquidity position to ensure it can meet its short-term financial commitments effectively.
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 | -1,214.55 | -1,000.89 | -1,151.07 | -734.95 | -1,319.06 | -935.75 | -31.20 | -0.87 | -8.56 | 22.08 | 26.72 | 23.59 | 8.91 | 21.39 | 14.76 | 15.33 | -2.26 | 22.46 | 14.95 | 12.81 |
The cash conversion cycle of American Water Works Co. Inc. has fluctuated over the past eight quarters. Generally, the company takes around 55 to 64 days to convert its investments in inventory into cash from sales. A lower cash conversion cycle is indicative of a more efficient use of working capital as the company is able to quickly convert its inventory into cash. In the most recent quarter, the cash conversion cycle stood at 55.26 days, showing an improvement compared to the previous quarter. However, it is higher than the cycle in Q1 2022. Variability in the cash conversion cycle may reflect changes in the company's inventory management, accounts receivable collection, and accounts payable practices. A detailed analysis of these components could provide insights into opportunities for further optimizing the company's cash conversion cycle.