Pinnacle West Capital Corp (PNW)

Pinnacle West Capital Corp's liquidity ratios provide insight into the company's ability to meet its short-term financial obligations.

The current ratio remained relatively consistent over the years, ranging around 0.88 to 0.99, indicating that the company may have had difficulty covering its current liabilities with its current assets. A current ratio below 1 suggests potential liquidity challenges.

The quick ratio, which excludes inventory from current assets, showed substantial variability. While it improved significantly in 2022 to 3.49, indicating a strong ability to meet current obligations without relying on inventory, it dropped in the following years to 0.19 and 0.18. A quick ratio below 1 may signal potential short-term liquidity issues.

The cash ratio, which is the most conservative measure of liquidity, also fluctuated considerably. In 2022, the cash ratio was notably high at 3.24, indicating a solid cash position. However, it decreased substantially in the subsequent years, with the ratio falling to 0.02 in 2023 and 0.00 in 2024. A declining cash ratio could signal a decreased ability to cover current liabilities with cash alone.

Overall, the liquidity ratios of Pinnacle West Capital Corp suggest potential liquidity challenges, especially with the current and cash ratios consistently below 1 in the later years and the quick ratio fluctuating significantly. This situation may require careful monitoring and management to ensure the company can effectively meet its short-term financial obligations.

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Additional liquidity measure

The cash conversion cycle of Pinnacle West Capital Corp has shown some fluctuations over the years. In December 2020, it stood at 33.57 days, decreasing slightly to 31.47 days by December 2021. However, starting from December 2022, the cash conversion cycle increased to 40.16 days, further rising to 44.52 days by December 2023. In the most recent period ending December 31, 2024, the cash conversion cycle decreased to 37.51 days.

These fluctuations indicate that the company may be experiencing changes in its operating efficiency and liquidity management. A longer cash conversion cycle may suggest inefficiencies in managing inventory, receivables, and payables, leading to a longer period for the company to convert its investments in raw materials into cash inflows from sales. On the contrary, a shorter cash conversion cycle may signify better working capital management and quicker conversion of assets into cash.

Overall, a thorough analysis of the factors contributing to these changes, such as operational processes, market conditions, and strategic decisions, would be crucial in understanding the implications of the cash conversion cycle fluctuations for Pinnacle West Capital Corp.