MGE Energy Inc (MGEE)

MGE Energy Inc's liquidity ratios, as reflected by the current ratio, quick ratio, and cash ratio, portray the company's ability to meet its short-term financial obligations effectively.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has fluctuated over the years but generally stayed above 1. This indicates that MGE Energy Inc has had sufficient current assets to cover its current liabilities, with a current ratio peaking at 1.99 in June 2020 and hitting a low of 1.03 in September 2022. Overall, the current ratio has been relatively stable, reflecting a healthy liquidity position.

The quick ratio, also known as the acid-test ratio, provides a more stringent assessment of liquidity by excluding inventory from current assets. MGE Energy Inc's quick ratio has shown more variability compared to the current ratio, dipping below 1 in some periods. The company had its strongest quick ratio of 1.25 in March 2022, indicating a robust ability to meet short-term obligations without relying on inventory. However, the ratio dropped significantly in June 2023 and September 2023, resulting in negative values, suggesting potential liquidity challenges during those periods.

The cash ratio, which focuses solely on the most liquid assets like cash and cash equivalents to cover current liabilities, helps assess MGE Energy Inc's ability to meet immediate obligations without relying on other current assets. The company's cash ratio has generally been low but positive, with values ranging from 0.05 to 0.57. Notably, the cash ratio reached its highest point in September 2021, indicating a relatively strong cash position during that period.

Overall, while MGE Energy Inc has maintained a current ratio above 1, reflecting adequate short-term liquidity, the fluctuating quick ratio and relatively low cash ratio suggest some variability in the company's ability to meet short-term obligations solely with its most liquid assets. Monitoring these ratios over time can provide valuable insights into the company's liquidity management and financial health.

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Additional liquidity measure

The cash conversion cycle of MGE Energy Inc has shown fluctuations over the periods analyzed. A positive cash conversion cycle indicates that the company takes longer to convert its investments in inventory and other resources into cash. Conversely, a negative cash conversion cycle implies that the company is able to convert its investments quickly into cash flow.

From March 31, 2020, to June 30, 2020, the company's cash conversion cycle increased significantly from 75.98 days to 148.09 days, indicating a slower conversion of investments to cash. However, there was a sharp decline in the cycle by September 30, 2020, becoming negative at -85.12 days, indicating an efficient cash conversion.

Throughout the subsequent quarters up to December 31, 2022, MGE Energy Inc maintained negative cash conversion cycles, reflecting its ability to efficiently convert investments into cash flows. Notably, the cycle fluctuated, sometimes significantly, over this period.

By March 31, 2023, the cash conversion cycle increased substantially to 602.27 days and further increased to 631.12 days by June 30, 2023. This indicates a significant delay in converting investments to cash during these periods.

As of December 31, 2024, the cash conversion cycle was -86.71 days, displaying a reversal to efficient cash conversion. Overall, the company experiences fluctuations in its cash conversion performance, with periods of efficiency and inefficiency in converting investments into cash flow.