FirstEnergy Corporation (FE)

Firstenergy Corp.'s liquidity ratios have shown varying trends over the past five years. The current ratio measures the firm's ability to cover its short-term obligations with its current assets. The current ratio has been decreasing from 0.50 in 2019 to 0.48 in 2023, which indicates a declining ability to meet short-term obligations.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has followed a similar declining trend. The quick ratio decreased from 0.43 in 2019 to 0.37 in 2023, suggesting a reduced ability to cover short-term liabilities without relying on inventory.

The cash ratio, which is the most conservative liquidity ratio as it only considers cash and cash equivalents, also displays a downward trend. The cash ratio decreased from 0.16 in 2019 to 0.08 in 2023, indicating a decreasing capacity to meet immediate obligations solely with cash on hand.

Overall, Firstenergy Corp.'s liquidity ratios have been deteriorating over the years, indicating potential liquidity challenges. Management should closely monitor these ratios and take appropriate actions to improve liquidity and ensure the company can meet its short-term financial obligations effectively.

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Additional liquidity measure

Firstenergy Corp.'s cash conversion cycle has fluctuated over the past five years, indicating changes in its operating efficiency and liquidity management. The company had a cash conversion cycle of -21.85 days at the end of 2023, which represents an improvement compared to the previous year.

A negative cash conversion cycle, as seen in the case of Firstenergy Corp., suggests that the company is able to collect cash from customers before paying its suppliers and creditors. This can be a positive sign of strong working capital management, efficient inventory turnover, and effective credit terms with customers.

In the context of Firstenergy Corp., the improvement in the cash conversion cycle from -39.96 days in 2022 to -21.85 days in 2023 indicates that the company has been able to optimize its working capital management, reduce the time it takes to convert inventory into cash, and streamline its accounts receivable collection process. This efficiency may have been achieved through better inventory control, faster accounts receivable turnover, or improved supplier payment terms.

Overall, a lower (or negative) cash conversion cycle suggests that Firstenergy Corp. is effectively managing its cash flow and working capital, which can lead to enhanced financial stability and improved profitability in the long term.