California Water Service Group (CWT)

The liquidity ratios of California Water Service Group show fluctuations over the past five years.

The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has been on a declining trend. In 2021 and 2022, the current ratio was above 1, indicating a relatively healthier position, but dropped significantly in 2023 to 0.69, signaling potential liquidity challenges.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventories from current assets. This ratio followed a similar trend as the current ratio, decreasing from 1.13 in 2021 to 0.55 in 2023. A quick ratio below 1 suggests potential difficulties in meeting immediate obligations without relying on inventory liquidation.

The cash ratio, which is the most conservative liquidity ratio as it only considers cash and cash equivalents, also exhibited a decreasing pattern over the years. While the cash ratio was relatively low in all years, it dropped from 0.39 in 2021 to 0.13 in 2023, indicating a limited ability to cover short-term liabilities solely with cash.

Overall, the declining trend in all three liquidity ratios suggests that California Water Service Group may be facing challenges in managing its short-term obligations and maintaining adequate levels of liquid assets. This could potentially lead to liquidity issues if not addressed in a timely manner.

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Additional liquidity measure

The cash conversion cycle for California Water Service Group has shown a consistently negative trend over the past five years. This indicates that the company is efficiently managing its working capital and converting its resources into cash quickly.

For the latest reported period, as of December 31, 2023, the cash conversion cycle reached -109.84 days, representing a slight increase compared to the prior year. Despite this slight increase, the company continues to operate with a negative cash conversion cycle, suggesting streamlined operations in terms of collecting receivables, managing inventory, and paying suppliers.

The negative cash conversion cycle indicates that California Water Service Group is able to generate cash inflows before having to settle its payables, potentially reducing the need for external financing and enhancing liquidity. This has been a consistent strength for the company in recent years, contributing to its overall financial stability and operational efficiency.