PPL Corporation (PPL)

The liquidity ratios of PPL Corp, based on the data provided, show a varying trend over the past five years.

1. Current Ratio: The current ratio measures the ability of a company to meet its short-term obligations with its current assets. PPL Corp's current ratio has fluctuated significantly, decreasing from 2.16 in 2021 to 0.88 in 2023. This indicates a potential weakening ability to cover short-term liabilities with current assets.

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. PPL Corp's quick ratio follows a similar pattern to the current ratio, declining from 2.02 in 2021 to 0.73 in 2023. This suggests a reduced ability to cover immediate liabilities with more liquid assets.

3. Cash Ratio: The cash ratio specifically focuses on the ability of a company to cover its current liabilities with cash and cash equivalents. PPL Corp's cash ratio has also decreased over the years, from 1.61 in 2021 to 0.23 in 2023, indicating a potential strain on the company's cash position to meet short-term obligations.

Overall, the declining trend in these liquidity ratios suggests a potential liquidity risk for PPL Corp, as the ability to meet short-term obligations with current assets, liquid assets, and cash has weakened over the years. It is important for investors and stakeholders to monitor these ratios closely to assess the company's liquidity position accurately.

---

Additional liquidity measure

The cash conversion cycle of PPL Corp has shown significant improvement over the past five years. In particular, the company has successfully reduced its cash conversion cycle from negative 98.16 days in 2019 to negative 12.53 days in 2023, reflecting a more efficient management of its working capital.

The negative values indicate that PPL Corp's operating cycle (the average number of days it takes to turn raw materials into cash receipts from sales) is shorter than its cash cycle (the time it takes to turn sales into cash). This suggests that the company is able to generate cash quickly from its operations, which is a positive indicator of liquidity and operational efficiency.

The decreasing trend in the cash conversion cycle over the years indicates that PPL Corp has been able to improve its cash flow management, potentially by reducing inventory holding periods, efficiently collecting receivables, and extending payment periods to suppliers. This trend signifies that the company has become more effective in managing its working capital and converting its assets into cash.

Overall, the improvement in PPL Corp's cash conversion cycle reflects positively on the company's financial health and operational efficiency, as it indicates better liquidity, effective working capital management, and potentially enhanced profitability.