Sunrun Inc (RUN)

Sunrun Inc's liquidity ratios provide insights into the company's ability to meet its short-term obligations and manage its current liabilities effectively.

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term liabilities with its current assets.
- Sunrun's current ratio has fluctuated over the past five years, ranging from a low of 1.26 in 2020 to a high of 1.82 in 2022.
- A current ratio above 1 indicates that Sunrun has more than enough current assets to cover its current liabilities.
- The decreasing trend from 2022 to 2023 may suggest a potential liquidity strain or a change in the company's current asset or liability composition.

2. Quick Ratio:
- The quick ratio assesses the company's ability to meet its short-term obligations with its most liquid assets, excluding inventory.
- Sunrun's quick ratio has also varied over the years, with a range from 0.72 in 2019 to 0.95 in 2022.
- A quick ratio below 1 indicates a potential inability to cover short-term obligations without relying on the sale of inventory.
- The decreasing trend in the quick ratio from 2022 to 2023 may raise concerns about the company's liquidity position.

3. Cash Ratio:
- The cash ratio focuses solely on the company's ability to cover its short-term liabilities with cash and cash equivalents.
- Sunrun's cash ratio has shown fluctuations, ranging from 0.57 in 2019 to 0.77 in 2022.
- A cash ratio below 1 signifies a reliance on sources other than cash to meet short-term liabilities.
- The decreasing trend in the cash ratio from 2022 to 2023 suggests a potential decrease in the company's ability to cover its short-term obligations with cash alone.

Overall, while Sunrun Inc has maintained liquidity ratios above 1 in most years, the decreasing trends in the ratios from 2022 to 2023 warrant further monitoring to ensure the company's ability to meet its short-term obligations effectively.

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Additional liquidity measure

Sunrun Inc's cash conversion cycle has exhibited fluctuations over the past five years. The cycle measures the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales. A shorter cash conversion cycle is generally favorable as it indicates a faster turnover of resources into cash.

In 2023, the cash conversion cycle decreased significantly to 67.65 days from 113.94 days in 2022, indicating improved efficiency in managing working capital and converting inventory and receivables into cash. This may have been driven by better inventory and accounts receivable management strategies.

However, compared to 2021 and 2020, the cash conversion cycle in 2023 is still higher, suggesting that there may be room for further optimization in working capital management processes. In 2021, the cycle was 91.57 days, indicating a longer period to convert investments into cash compared to 2023.

In 2020 and 2019, the cash conversion cycle was 74.77 days and 54.08 days, respectively. The decrease from 2019 to 2020 and the subsequent increase in 2021 and 2022 followed by a significant decrease in 2023 may indicate fluctuations in the company's working capital management efficiency over these years.

Overall, further analysis of Sunrun Inc's working capital components such as inventory turnover, accounts receivable turnover, and accounts payable turnover ratios may provide insights into the factors contributing to the changes in the cash conversion cycle over the years.