Powell Industries Inc (POWL)

Powell Industries Inc's liquidity ratios indicate the firm's ability to meet short-term obligations. The current ratio has shown variability over the past five years, ranging from 1.57 to 2.50, with a current value of 1.81 as of September 30, 2024. This suggests that Powell Industries Inc has $1.81 in current assets for every $1 of current liabilities, providing a sufficient cushion to cover short-term obligations, although a decreasing trend may warrant monitoring.

The quick ratio, which excludes inventory from current assets, has also fluctuated over the years, from 1.20 to 1.75. As of September 30, 2024, the quick ratio stands at 1.34, indicating the company has $1.34 in liquid assets available to cover immediate liabilities. The quick ratio provides a more conservative measure of liquidity compared to the current ratio.

The cash ratio, which is the most stringent measure of liquidity, has ranged from 0.63 to 1.17 over the past five years. As of September 30, 2024, the cash ratio is 0.84, implying that the company has $0.84 in cash and cash equivalents to cover each dollar of current liabilities. While the cash ratio has improved from the previous year, it remains below 1, indicating that a significant portion of current liabilities may not be covered by cash.

Overall, the liquidity ratios of Powell Industries Inc suggest that the company has generally maintained a strong liquidity position, as evidenced by current and quick ratios above 1. However, the declining trend in some ratios and the cash ratio below 1 indicate the need for continued monitoring of the company's ability to meet short-term obligations.

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Additional liquidity measure

The cash conversion cycle measures how efficiently a company manages its working capital by assessing the time it takes to convert its investments in inventory and accounts receivable into cash from sales.

Over the past five years, Powell Industries Inc's cash conversion cycle has shown fluctuations. In 2024, the cash conversion cycle increased to 44.08 days from 58.09 days in 2023, indicating a slight improvement in cash management efficiency. However, compared to 2022 when it was at 27.21 days, the cycle has elongated, suggesting a potential delay in converting inventory and receivables into cash.

Furthermore, the cash conversion cycle in 2021 was 18.26 days, indicating a rapid conversion of investments into cash. This trend continued in 2020 when the cash conversion cycle was 20.29 days, reflecting efficient working capital management.

Overall, Powell Industries Inc's cash conversion cycle has shown mixed performance over the past five years, with fluctuations suggesting varying levels of efficiency in managing working capital. Further analysis of the company's inventory turnover and accounts receivable collection periods could provide additional insights into its cash management practices and operational efficiency.