Public Service Enterprise Group Inc (PEG)

The liquidity ratios of Public Service Enterprise Group Inc indicate the firm's ability to meet its short-term financial obligations.

1. Current Ratio: The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has shown some fluctuations over the years. It was 0.66 in 2020, increased to 0.88 in 2021, but then decreased to 0.64 in 2022. In 2023, there was a slight improvement to 0.67, followed by a decrease to 0.65 in 2024. Overall, the current ratio hovers below the ideal threshold of 1.0, indicating a potential liquidity risk.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventories from current assets. The quick ratio remained relatively stable over the years, ranging from 0.37 to 0.42, with a slight increase to 0.90 in 2023. Despite this variability, the quick ratio suggests that the company may face challenges in meeting its immediate obligations without relying on inventory sales.

3. Cash Ratio: The cash ratio, which focuses solely on the company's ability to cover its current obligations with cash and cash equivalents, shows significant variation over the years. It was 0.11 in 2020, increased to 0.12 in 2021, but then decreased to 0.07 in 2022. In 2023, there was a substantial improvement to 0.56, followed by a significant drop to 0.02 in 2024. The cash ratio highlights the company's fluctuating ability to meet short-term obligations through readily available cash resources.

In summary, the liquidity ratios of Public Service Enterprise Group Inc suggest that the company may face challenges in meeting its short-term financial obligations, as indicated by current and quick ratios consistently below 1.0. The fluctuations in cash ratio further emphasize the company's varying ability to rely on cash reserves to meet immediate liabilities. Stakeholders should closely monitor these ratios to assess the company's liquidity position and manage potential risks.

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Additional liquidity measure

The cash conversion cycle of Public Service Enterprise Group Inc has displayed fluctuations over the years. As of December 31, 2020, the company had a negative cash conversion cycle of -22.47 days, indicating effective management of its working capital. However, by December 31, 2021, the cycle turned positive, standing at 34.99 days, which suggests a longer period between the company's cash outflows and inflows.

In the following years, the cash conversion cycle showed slight improvement, with the cycle reducing to 32.62 days by December 31, 2022, and further to 20.94 days by December 31, 2023. This trend indicates a potential enhancement in the company's efficiency in managing its operational cash flows.

However, by December 31, 2024, the cash conversion cycle increased significantly to 62.33 days, signifying a possible delay in converting the company's investments in inventory and accounts receivable into cash.

Overall, monitoring the cash conversion cycle is crucial for Public Service Enterprise Group Inc to assess its working capital efficiency and optimize cash flow management strategies to maintain a healthy financial position.