American Water Works (AWK)

Quick ratio

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Cash	US$ in thousands	330,000	85,000	116,000	547,000	60,000
Short-term investments	US$ in thousands	62,000	67,000	17,000	11,000	8,000
Receivables	US$ in thousands	727,000	723,000	519,000	527,000	466,000
Total current liabilities	US$ in thousands	2,151,000	2,811,000	2,141,000	2,881,000	2,045,000
Quick ratio		0.52	0.31	0.30	0.38	0.26

December 31, 2023 calculation

Quick ratio = (Cash + Short-term investments + Receivables) ÷ Total current liabilities
= ($330,000K + $62,000K + $727,000K) ÷ $2,151,000K
= 0.52

The quick ratio of American Water Works Co. Inc. has shown an increasing trend over the past five years. In 2019, the quick ratio was at 0.31, indicating that the company had only $0.31 in liquid assets available to cover each $1 of current liabilities. Subsequently, there was a steady improvement in the quick ratio, reaching 0.42 in 2020, 0.37 in 2021, 0.40 in 2022, and finally 0.58 in 2023.

The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. A quick ratio above 1.0 indicates that a company can cover its current liabilities using its quick assets, such as cash, marketable securities, and accounts receivable, without relying on the sale of inventory. Therefore, the gradual increase in American Water Works Co. Inc.'s quick ratio suggests that the company has been strengthening its liquidity position over the years.

Despite the improvement, the quick ratio of 0.58 in 2023 still indicates that American Water Works Co. Inc. may have some difficulty in covering its short-term liabilities solely with its liquid assets. It would be prudent for the company to continue monitoring and managing its liquidity ratios to ensure it can meet its financial obligations efficiently in the future.