Chesapeake Utilities Corporation (CPK)

Chesapeake Utilities Corp's liquidity ratios reflect its ability to meet short-term obligations and manage its current liabilities. The trend analysis of the liquidity ratios over the past five years indicates some fluctuations:

1. Current ratio: The current ratio measures the company's ability to cover its short-term obligations with its current assets. Chesapeake Utilities' current ratio has shown variability over the years, ranging from 0.32 in 2019 to 0.53 in 2022. The ratio decreased to 0.48 in 2023, suggesting a slight decline in the company's ability to cover its short-term liabilities with current assets.

2. Quick ratio: The quick ratio provides a more stringent measure of liquidity, excluding inventory from current assets. Chesapeake Utilities' quick ratio has also fluctuated over the years, ranging from 0.29 in 2019 to 0.44 in 2022. The ratio decreased to 0.39 in 2023, indicating a slight decline in the company's ability to meet short-term obligations without relying on inventory.

3. Cash ratio: The cash ratio reflects the company's ability to cover its short-term liabilities with cash and cash equivalents. Chesapeake Utilities' cash ratio has varied over the years, ranging from 0.08 in 2019 to 0.18 in 2022. The ratio decreased to 0.11 in 2023, suggesting a decrease in the company's ability to cover short-term obligations solely with cash and cash equivalents.

Overall, while Chesapeake Utilities Corp's liquidity ratios have shown some fluctuations, the company may need to focus on managing its current assets more effectively to improve its liquidity position and ensure its ability to meet short-term obligations in the future.

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Additional liquidity measure

The cash conversion cycle measures how quickly a company can convert its investments in inventory into cash flows from sales. Chesapeake Utilities Corp's cash conversion cycle has fluctuated over the past five years. In 2023, the company's cash conversion cycle was -14.55 days, indicating that it is able to generate cash from its operations before paying suppliers for inventory. This suggests strong liquidity and efficient management of working capital. In contrast, in 2020 and 2019, the company had negative cash conversion cycles as well, which may indicate high efficiency in managing inventory and collecting receivables. However, the significant negative value in 2020 (-60.89 days) suggests the company may have been overly aggressive in managing its working capital, potentially risking stockouts or strained supplier relationships. Overall, the trend in Chesapeake Utilities Corp's cash conversion cycle shows variability, and it would be important for the company to strike a balance between efficient working capital management and maintaining healthy supplier relationships.