Otter Tail Corporation (OTTR)

Otter Tail Corporation's liquidity ratios show a significant improvement over the years, indicating a better ability to meet short-term obligations.

- The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has increased from 0.54 in 2020 to 2.03 in 2024. This suggests that Otter Tail Corporation has more than enough current assets to cover its current liabilities, reflecting a stronger financial position.

- The quick ratio, also known as the acid-test ratio, is a more stringent measure of liquidity as it excludes inventory from current assets. Otter Tail Corporation's quick ratio has shown a consistent upward trend, from 0.27 in 2020 to 1.43 in 2024. This signifies that the company has a solid ability to meet its short-term obligations without relying on inventory sales.

- The cash ratio, which indicates the proportion of current liabilities that can be covered by cash and cash equivalents, has shown a significant improvement as well. It has increased from 0.01 in 2020 to 0.95 in 2024, indicating that Otter Tail Corporation has a higher level of cash reserves to meet its immediate financial obligations.

Overall, the trend of increasing liquidity ratios across the board suggests that Otter Tail Corporation has strengthened its financial position and is better positioned to handle short-term financial challenges.

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Additional liquidity measure

Otter Tail Corporation's cash conversion cycle has shown significant variation over the years. The company's cash conversion cycle was a negative 1,966.97 days as of December 31, 2020, implying that the company had an efficient process of converting its investments in inventory into cash. However, this extreme negative number may indicate potential issues with data accuracy or calculation methodology.

Subsequently, the cash conversion cycle increased to 63.81 days by the end of 2021, indicating that the company took approximately 64 days to convert its investments in inventory into cash during that period. This suggests a significant improvement in efficiency compared to the highly negative figure from the previous year.

In 2022, the cash conversion cycle remained relatively stable at 64.16 days, indicating that Otter Tail Corporation continued to manage its working capital effectively. However, by the end of 2023, the cash conversion cycle increased to 81.97 days, signaling a potential slowdown in the company's ability to convert inventory and accounts receivable into cash.

By the end of 2024, the cash conversion cycle decreased to 65.97 days, showing a slight improvement in efficiency compared to the previous year. Overall, Otter Tail Corporation's cash conversion cycle has exhibited fluctuations, with the company experiencing periods of both efficient and less efficient working capital management over the years.