PNM Resources Inc (PNM)

Based on the provided data, let's analyze the liquidity ratios of PNM Resources Inc over the past five years.

1. Current Ratio:
The current ratio measures the company's ability to meet short-term obligations with its current assets. A higher current ratio indicates a stronger liquidity position. PNM Resources Inc's current ratio has fluctuated over the years, ranging from 0.30 in 2019 to 0.49 in 2021. However, at the end of 2023, the current ratio decreased to 0.39. This indicates that the company may have difficulty in meeting its short-term obligations with its current assets, as the ratio is relatively low.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Similarly to the current ratio, a higher quick ratio is preferable. PNM Resources Inc's quick ratio has shown a similar trend to the current ratio, with variations over the years. The quick ratio varied from 0.22 in 2019 to 0.39 in 2021. By the end of 2023, the quick ratio decreased to 0.31, indicating a potential challenge in meeting short-term obligations with liquid assets only.

3. Cash Ratio:
The cash ratio is the most conservative liquidity ratio, focusing solely on a company's ability to cover its current liabilities with cash and cash equivalents. PNM Resources Inc's cash ratio has also fluctuated over the years, ranging from 0.06 in 2019 to 0.12 in 2020. However, by the end of 2023, the cash ratio remained relatively stable at 0.08. This suggests that the company maintains a modest level of cash to cover its short-term liabilities.

In conclusion, based on the liquidity ratios of PNM Resources Inc over the past five years, it appears that the company may face challenges in meeting its short-term obligations with its current assets alone. The decreasing trend in both the current and quick ratios raises concerns about the company's liquidity position. However, the stable cash ratio indicates that PNM Resources Inc maintains a reasonable level of cash reserves to support its liquidity needs.

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Additional liquidity measure

The cash conversion cycle of PNM Resources Inc has shown fluctuations over the past five years. In 2023, the company's cash conversion cycle was 7.74 days, indicating that it takes approximately 7.74 days for the company to convert its investments in inventory and other resources into cash flow from sales. This suggests that the company is capable of managing its working capital efficiently and converting its resources into revenue in a relatively short time frame.

In 2022, the cash conversion cycle was -4.12 days, which implies the company was able to convert its resources into cash flow even faster, potentially indicating effective inventory management and collection of accounts receivable.

In 2021 and 2020, the company's cash conversion cycle was negative as well, -7.78 days and -16.63 days respectively. A negative cash conversion cycle suggests that the company is receiving payments from customers before needing to pay its suppliers and therefore has a strong cash position and efficient working capital management.

However, in 2019, the cash conversion cycle was 23.61 days, indicating that the company took longer to convert its investments into cash flow. This could suggest issues with inventory management or delays in collecting accounts receivable during that period.

Overall, the trend in PNM Resources Inc's cash conversion cycle indicates fluctuations but generally portrays an efficient working capital management, especially in recent years where the cycle has been negative, indicating strong cash flow generation and effective utilization of resources.