Eversource Energy (ES)

The liquidity ratios of Eversource Energy, namely the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet its short-term financial obligations.

The current ratio, which compares current assets to current liabilities, has been fluctuating over the past five years, ranging from 0.56 to 0.67. A current ratio below 1 indicates that the company may have difficulties in meeting its short-term obligations with its current assets alone. Eversource Energy's current ratio has generally been below 1, which may raise concerns about its liquidity position.

The quick ratio, a more stringent measure of liquidity as it excludes inventory from current assets, has shown a similar trend as the current ratio, ranging from 0.51 to 0.60. The quick ratio being lower than the current ratio signifies that the company's ability to meet its short-term obligations using its most liquid assets is constrained.

The cash ratio, which is the most conservative measure of liquidity as it considers only cash and cash equivalents, has also been relatively low, ranging from 0.27 to 0.33. This indicates that Eversource Energy may have limited cash on hand compared to its short-term liabilities, potentially impacting its ability to cover immediate financial obligations.

Overall, the liquidity ratios suggest that Eversource Energy may face challenges in meeting its short-term financial commitments. Investors and stakeholders may need to monitor these ratios closely to assess the company's liquidity position and its ability to manage short-term cash requirements effectively.

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Additional liquidity measure

The cash conversion cycle of Eversource Energy has shown a consistent improvement over the past five years. The company's ability to efficiently convert its resources into cash has been increasing steadily.

In 2019, the cash conversion cycle was at -59.44 days, indicating that Eversource Energy was able to convert its investment in inventory and accounts receivable into cash within approximately two months. Subsequently, the cycle improved further in 2020, decreasing to -76.42 days, demonstrating a higher efficiency in managing its working capital.

By the end of 2021, the cash conversion cycle had significantly improved to -98.86 days, reflecting the company's enhanced cash management processes. The trend continued in 2022 with a further reduction to -74.47 days, indicating that Eversource Energy was able to convert its cash back into cash flow even more efficiently.

The most recent data as of December 31, 2023, shows a cash conversion cycle of -45.41 days, signaling that Eversource Energy has maintained its strong cash conversion performance and continued to optimize its working capital management.

Overall, the consistently negative values of the cash conversion cycle suggest that Eversource Energy has been effectively managing its cash flows, inventory, and receivables, resulting in quicker conversion of its resources into cash and ultimately improving its overall financial performance.