Black Hills Corporation (BKH)

Based on the provided data, let's analyze the liquidity ratios of Black Hills Corporation:

1. Current Ratio: The current ratio measures the company's ability to cover its short-term obligations with its short-term assets. Black Hills Corporation's current ratio has shown some fluctuation over the years, with values ranging from 0.64 to 0.97. A current ratio below 1 indicates that the company may have difficulty meeting its short-term liabilities with its current assets. The trend indicates that the company's ability to cover short-term obligations improved from 2020 to 2024.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Black Hills Corporation's quick ratio values have been relatively low, ranging from 0.33 to 0.71. A quick ratio below 1 suggests that the company may struggle to meet its short-term obligations without relying on selling inventory. The trend indicates some variations in the quick ratio over the years.

3. Cash Ratio: The cash ratio focuses exclusively on the company's ability to cover its current liabilities with cash and cash equivalents. Black Hills Corporation's cash ratio values have been low, ranging from 0.01 to 0.07. A cash ratio of less than 0.10 implies that the company may have minimal cash reserves to meet its short-term obligations. The data shows some improvement in the cash ratio in 2023 compared to the previous years.

In conclusion, based on the liquidity ratios analyzed, Black Hills Corporation has shown some fluctuations in its ability to meet short-term obligations, with improvements in some ratios over the years. However, the company may still need to enhance its liquidity position to ensure it can meet its short-term liabilities comfortably.

---

Additional liquidity measure

The cash conversion cycle of Black Hills Corporation has displayed fluctuations over the past five years. As of December 31, 2020, the company had a negative cash conversion cycle of -336.67 days, indicating that it was able to convert its inventory into cash quickly, potentially through efficient inventory management or favorable payment terms with suppliers.

By December 31, 2021, the cash conversion cycle improved slightly to -315.37 days, continuing the trend of negative cycles. However, by December 31, 2022, the cycle extended to -450.51 days, suggesting a potential delay in collecting cash from customers or a slower conversion of inventory to sales.

The situation changed dramatically by December 31, 2023, when the cash conversion cycle improved significantly to -72.25 days, reflecting a faster conversion of inventory and receivables into cash. This improvement may have been due to better working capital management.

As of December 31, 2024, the cash conversion cycle turned positive at 9.29 days, indicating that the company took longer to convert its inventory and receivables into cash compared to the previous years. The positive cycle might suggest a potential issue with working capital efficiency that the company may need to address.

In summary, while Black Hills Corporation has experienced fluctuations in its cash conversion cycle over the years, it is important for the company to monitor and manage this cycle effectively to ensure optimal cash flow and working capital efficiency.