NiSource Inc (NI)

NiSource Inc's liquidity ratios depict its ability to meet short-term obligations and manage cash effectively.

The current ratio, which measures the company's ability to pay off its current liabilities with its current assets, shows a declining trend from 2020 to 2022 before experiencing a slight improvement in 2023 and a significant drop in 2024. While the ratio was below 1 in 2020, indicating potential liquidity challenges, it improved slightly in 2023. However, in 2024, the ratio dropped significantly to 0.51, indicating a potential risk in meeting short-term liabilities with current assets.

The quick ratio, also known as the acid-test ratio, provides a more stringent assessment of liquidity by excluding inventory from current assets. NiSource Inc's quick ratio also displays a decreasing trend over the period, dropping from 0.55 in 2020 to 0.27 in 2024. This downward trend suggests a decreasing ability to cover immediate liabilities without relying on the sale of inventory, which may indicate potential liquidity pressure.

The cash ratio, representing the most stringent measure of liquidity by focusing solely on cash and cash equivalents to cover current liabilities, fluctuates over the years, showing an improvement in 2021 and 2023 but decreased to 0.04 in 2024. This indicates that NiSource Inc may have a limited ability to settle its short-term obligations with its available cash resources.

Overall, the declining trends in all three liquidity ratios, especially in 2024, raise concerns about NiSource Inc's ability to meet its short-term obligations and manage cash effectively. Management may need to closely monitor and improve the company's liquidity position to ensure continued financial stability.

---

Additional liquidity measure

The cash conversion cycle of NiSource Inc has shown significant fluctuations over the past five years.

1. In December 2020, the company's cash conversion cycle was 62.65 days, indicating that it took the company approximately 62.65 days to convert its investments in inventory and accounts receivable into cash.

2. By December 2021, NiSource Inc managed to improve its cash conversion cycle to 26.83 days, demonstrating a more efficient management of its working capital.

3. However, in December 2022, the cash conversion cycle increased to 49.35 days, suggesting a potential delay in converting investments into cash compared to the previous year.

4. Interestingly, by December 2023, the cash conversion cycle experienced a significant improvement, dropping to 18.00 days. This sharp decrease may indicate enhanced efficiency in managing the company's working capital and converting it into cash.

5. The most recent data point, December 2024, shows a negative cash conversion cycle of -37.61 days. A negative cash conversion cycle typically indicates that the company is able to convert investments into cash before it needs to pay its own bills, suggesting improved working capital management efficiency.

Overall, the trend in NiSource Inc's cash conversion cycle shows fluctuations across the years, with improvements in some years and challenges in others. It is essential for the company to consistently monitor and manage its working capital efficiency to ensure optimal cash flow and overall financial health.