California Water Service Group (CWT)

Short-term

Turnover ratios

The activity ratios of California Water Service Group provide insight into its operational efficiency and effectiveness in managing its resources.

1. Inventory turnover:
The inventory turnover ratio has been consistently decreasing over the quarters, indicating that the company is holding onto its inventory for a longer period before selling. However, the ratio remains relatively high, suggesting that the company is efficiently managing its inventory levels and effectively turning over its stock.

2. Receivables turnover:
The receivables turnover ratio fluctuates but generally shows a declining trend. This indicates that the company is taking longer to collect on its receivables, which may have implications for cash flow and liquidity. The lower ratio may suggest a need for the company to improve its credit policies or collection processes.

3. Payables turnover:
The payables turnover ratio shows variation but remains relatively stable over the quarters. A higher ratio indicates that the company is paying its suppliers more quickly, which could potentially strain its cash flow. Conversely, a lower ratio may indicate that the company is taking longer to pay its suppliers, which could be beneficial for cash management.

4. Working capital turnover:
The working capital turnover ratio is not provided for some quarters but shows a significantly high value in Q4 2022. This may suggest that the company efficiently utilized its working capital during that period to generate sales. The absence of data for other quarters makes it challenging to assess the trend of working capital efficiency throughout the year.

Overall, analyzing these activity ratios can help stakeholders understand how effectively California Water Service Group is managing its inventory, receivables, payables, and working capital to support its operations and financial performance.

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Average number of days

Activity ratios provide valuable insights into how efficiently a company manages its assets and liabilities. Let's analyze the activity ratios of California Water Service Group based on the given data:

1. Days of Inventory on Hand (DOH):
The DOH shows how many days, on average, a company holds inventory before selling it. California Water Service Group's DOH has been increasing steadily over the quarters, indicating a lengthening of the time it takes to sell inventory. This could suggest potential issues with inventory management efficiency.

2. Days of Sales Outstanding (DSO):
The DSO metric measures the average number of days it takes for a company to collect revenue after making a sale. California Water Service Group's DSO has shown fluctuation across quarters, with Q3 2023 and Q2 2023 exhibiting higher values compared to previous quarters. This suggests that the company may be experiencing delays in receiving payments from customers, potentially impacting cash flow.

3. Number of Days of Payables:
This metric reflects how long a company takes to pay its suppliers. California Water Service Group's number of days of payables has shown variability over the quarters, but it remains relatively stable. The company appears to be taking a considerable amount of time to pay its payables, which could indicate a conservative approach to managing its liabilities.

In summary, while the company's days of inventory on hand and days of sales outstanding have shown some concerning trends, its management of payables seems relatively stable. California Water Service Group may need to focus on improving its inventory turnover and collection processes to enhance its overall operational efficiency and financial performance.

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Long-term

The fixed asset turnover ratio for California Water Service Group has been declining slightly over the past quarters, from 0.28 in Q4 2022 to 0.21 in Q4 2023. This suggests that the company is generating less revenue from its fixed assets in relation to the value of those assets. It may indicate inefficiency in utilizing fixed assets to generate sales.

Meanwhile, the total asset turnover ratio also shows a decreasing trend over the same period, with a decrease from 0.22 in Q4 2022 to 0.17 in Q4 2023. This indicates that the company is generating less revenue per dollar of total assets. The declining total asset turnover may suggest inefficiencies in managing all assets, including both fixed and current assets.

Overall, the decreasing trends in both fixed asset turnover and total asset turnover ratios for California Water Service Group may raise concerns about the company's ability to efficiently utilize its assets to generate revenue. Further analysis and investigation into the company's operational efficiency and asset management practices may be warranted.