Eversource Energy (ES)

Eversource Energy's liquidity ratios paint a concerning picture as per the provided data.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has exhibited a downward trend from 0.64 in 2020 to 0.56 in 2021, before showing modest improvement to 0.62 in 2022, 0.67 in 2023, and finally 0.76 in 2024. Despite the slight recovery in recent years, the current ratio remains below the industry benchmark of 1, indicating potential liquidity challenges in meeting short-term obligations.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventories, cash, and receivables, has been consistently low and even deteriorated from 0.25 in 2020 to near-zero levels in subsequent years, reaching 0.03 in 2024. This suggests that Eversource Energy may struggle to meet its immediate liabilities without relying on inventory and receivables.

Similarly, the cash ratio, which indicates the proportion of current liabilities that can be covered by cash and cash equivalents alone, follows the same downward trajectory as the quick ratio, signaling limited cash reserves compared to short-term obligations.

In conclusion, Eversource Energy's liquidity ratios raise concerns about the company's ability to meet its short-term financial obligations efficiently. It is essential for the company to focus on improving liquidity management to ensure financial stability and mitigate potential liquidity risks in the future.

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Additional liquidity measure

The cash conversion cycle for Eversource Energy has fluctuated over the years, indicating changes in its working capital management efficiency. In 2020, the cycle was 21.70 days, showing the time it takes for the company to convert its investments in inventory and accounts receivable into cash. By the end of 2021, the cycle decreased to 19.10 days, suggesting an improvement in the company's ability to collect cash from its operating activities.

However, in 2022, the cash conversion cycle slightly increased to 19.86 days before experiencing a notable rise in 2023 to 26.21 days. This uptrend may indicate delays in receiving payments from customers or managing inventory levels less efficiently. By the end of 2024, the cycle slightly increased further to 26.47 days, continuing the trend of a longer cash conversion cycle.

Overall, fluctuations in the cash conversion cycle can provide insights into Eversource Energy's working capital management effectiveness and its ability to efficiently manage cash flows from its operational activities.