California Water Service Group (CWT)

The current ratio for California Water Service Group has shown significant fluctuations over the years. It was extremely low at 0.45 in December 31, 2020, indicating potential liquidity issues, but then improved to 1.17 in December 31, 2021, which was above the acceptable threshold of 1. However, the ratio dropped to 1.00 in December 31, 2022, and further decreased to 0.69 and 0.60 in December 31, 2023 and 2024 respectively. These declining trends suggest potential difficulties in meeting short-term obligations using current assets.

Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory, also shows fluctuations. It was very low at 0.08 in December 31, 2020, indicating a limited ability to cover immediate liabilities without relying on inventory sales. The ratio improved to 0.31 in December 31, 2021, but then declined to 0.21 in December 31, 2022, and remained at 0.09 for both December 31, 2023, and 2024. This pattern suggests that the company may face challenges in meeting short-term obligations using its most liquid assets.

The cash ratio, which is the most conservative liquidity measure as it only considers cash and cash equivalents, also exhibits similar patterns to the quick ratio. It was 0.08 in December 31, 2020, increased to 0.31 in December 31, 2021, dropped to 0.21 in December 31, 2022, and remained at 0.09 for both December 31, 2023, and 2024. This indicates that the company has a limited ability to cover short-term obligations solely with cash on hand.

In conclusion, while there have been improvements in liquidity ratios for California Water Service Group in certain years, the overall trend shows fluctuations and a downward trajectory in recent years, indicating potential liquidity challenges that may need closer attention and management.

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Additional liquidity measure

The cash conversion cycle for California Water Service Group has shown fluctuation over the past five years. In 2020, the company had a cash conversion cycle of 10.58 days, which increased to 11.31 days in 2021. The cycle further extended to 14.47 days in 2022 before decreasing slightly to 13.69 days in 2023. However, there was a significant spike in the cycle to 156.98 days by December 31, 2024.

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A shorter cycle indicates that the company is efficiently managing its working capital and can quickly convert its assets into cash. On the other hand, a longer cycle suggests inefficiencies in managing inventory, sales, or collection processes.

The substantial increase in the cash conversion cycle in 2024 compared to previous years may indicate potential challenges in managing working capital efficiently, which could lead to liquidity issues or cash flow constraints for California Water Service Group. It would be essential for the company to analyze the underlying reasons for this significant increase and take appropriate measures to improve its cash conversion cycle for better financial performance and stability.