Pinnacle West Capital Corp (PNW)

Pinnacle West Capital Corp.'s liquidity ratios indicate the company's ability to meet its short-term financial obligations effectively. The current ratio has shown fluctuations over the past five years, varying from 0.50 in 2019 to 0.99 in 2022. However, the ratio decreased to 0.67 in 2023, suggesting a potential weakening of the company's ability to cover its current liabilities with current assets.

The quick ratio also demonstrates a declining trend, from 0.33 in 2019 to 0.74 in 2022, and further dropping to 0.48 in 2023. This pattern indicates that Pinnacle West may face challenges in meeting its short-term obligations without relying on its inventory.

The cash ratio, which measures the company's ability to settle its short-term obligations with its most liquid assets, also follows a downward trajectory, from 0.13 in 2019 to 0.39 in 2022, and subsequently declining to 0.26 in 2023. This suggests that the company may have less cash available relative to its current liabilities.

Overall, the decreasing trend in these liquidity ratios, especially in 2023, implies a potential liquidity strain for Pinnacle West Capital Corp. It is essential for the company to closely monitor its liquidity position and take necessary actions to improve its ability to meet short-term financial obligations.

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Additional liquidity measure

The cash conversion cycle of Pinnacle West Capital Corp. has shown fluctuating trends over the past five years. In 2023, the company's cash conversion cycle increased to 61.65 days from 55.87 days in 2022. This indicates that the company took longer to convert its investments in inventory and accounts receivable into cash during that year.

Comparing 2023 to 2021, there was a notable increase from 40.54 days to 61.65 days, suggesting a prolonged cash conversion process. However, the cycle was still better compared to 2020 when it was 49.81 days. In 2019, the company had a cash conversion cycle of 42.73 days, which was lower than 2023 but higher than 2022.

Overall, Pinnacle West Capital Corp. experienced some challenges in managing its cash conversion cycle in 2023 compared to the previous years. Further analysis of the components contributing to this cycle, such as inventory turnover and accounts receivable collection efficiency, could provide insights into the company's working capital management.