Entergy Corporation (ETR)

Entergy Corp.'s liquidity ratios, as reflected in the current ratio, quick ratio, and cash ratio, indicate the company's ability to meet its short-term financial obligations.

The current ratio has been decreasing over the past five years, from 0.54 in 2019 to 0.57 in 2023. This declining trend suggests that Entergy's current assets may be becoming less sufficient to cover its current liabilities. A current ratio below 1.0 may indicate potential liquidity issues.

Similarly, the quick ratio, which measures the company's ability to meet short-term obligations with its most liquid assets, has also shown a decreasing trend from 0.37 in 2019 to 0.32 in 2023. This indicates that the company may have a lower ability to quickly meet its short-term liabilities using its most liquid assets.

The cash ratio, which focuses solely on the most liquid assets (cash and cash equivalents) relative to current liabilities, has also been declining from 2019 to 2023, from 0.15 to 0.10. This suggests a decreasing ability to cover short-term obligations using cash on hand.

Overall, the declining trend in all three liquidity ratios indicates that Entergy Corp. may be facing challenges in maintaining sufficient liquid assets to cover its short-term liabilities. This situation could potentially pose liquidity risks for the company if not effectively managed in the future.

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Additional liquidity measure

The cash conversion cycle (CCC) of Entergy Corp. has shown significant volatility over the past five years. In 2023, the company's cash conversion cycle increased to 46.23 days, representing a substantial rise compared to the previous year's 8.86 days. This indicates that Entergy is taking longer to convert its investments in inventory and other resources into cash.

In 2022, Entergy's CCC was positive at 8.86 days, showing an improvement from the negative CCC in 2021 and 2020. A positive CCC suggests that the company is taking longer to convert its resources into cash, which could potentially impact its liquidity.

The negative CCC figures in 2021 and 2020 (-95.79 days and -190.80 days, respectively) indicate that Entergy was efficiently managing its cash flows during those years. A negative CCC signifies that the company was able to convert its investments into cash quickly, indicating effective working capital management.

In 2019, the company had a negative CCC of -19.41 days, suggesting that Entergy was efficiently managing its working capital to generate cash flow during that year.

Overall, the fluctuating trend in Entergy's cash conversion cycle over the past five years highlights the importance of effective working capital management in maintaining liquidity and operational efficiency. Monitoring and analyzing the CCC can provide valuable insights into a company's ability to convert its assets into cash and manage its cash flows effectively.