Northwest Natural Gas Co (NWN)

Northwest Natural Holding Co's liquidity ratios have shown fluctuations over the past five years. The current ratio, which measures short-term liquidity by comparing current assets to current liabilities, has been below 1 since 2019, indicating potential difficulties in meeting short-term obligations. However, there has been a slight improvement in the current ratio from 2021 to 2023.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also shows a similar trend of improvement from 2021 to 2023. Despite still being below 1, this ratio provides a more conservative view of the company's ability to cover immediate liabilities.

The cash ratio, which focuses solely on cash and cash equivalents to cover current liabilities, has shown variability but generally has been increasing over the past five years. This indicates a positive trend in the company's ability to meet short-term obligations with its cash resources.

Overall, while the current and quick ratios indicate a need for improvement in short-term liquidity management, the increasing trend in the cash ratio is a positive signal. Further analysis and monitoring of working capital management are recommended to ensure the company's ability to meet its short-term financial commitments.

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Additional liquidity measure

The cash conversion cycle indicates the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

Northwest Natural Holding Co's cash conversion cycle has shown variability over the past five years. In 2023, the company's cash conversion cycle increased significantly to 37.33 days, indicating that it took longer to convert its investments into cash compared to the previous year. This increase may suggest potential challenges in managing inventory, collections, and payments efficiently.

In 2022, the company managed to reduce its cash conversion cycle to 10.11 days, which was a considerable improvement from the negative cycle seen in 2021. A lower cash conversion cycle suggests that the company was able to quickly convert its investments into cash, potentially indicating effective management of working capital.

The negative cash conversion cycles in 2021 and 2019 imply that the company was able to generate cash from its operations before having to pay suppliers, which can be a positive sign of efficiency and liquidity. However, it's essential to assess the reasons behind these negative cycles to ensure they are sustainable and not due to short-term factors.

Overall, monitoring Northwest Natural Holding Co's cash conversion cycle can provide insights into its operational efficiency, working capital management, and potential liquidity challenges. It is crucial for the company to strike a balance between minimizing the cycle to improve cash flows while ensuring it does not compromise operations or relationships with suppliers and customers.