Southwest Gas Holdings Inc (SWX)

The liquidity ratios of Southwest Gas Holdings Inc indicate fluctuations in its ability to meet short-term financial obligations. The current ratio shows a concerning trend, as it decreased from 0.96 in 2020 to 0.52 in 2021 but then improved to 1.08 in 2022 and further to 1.12 in 2023, before dropping slightly to 0.80 in 2024. This suggests an initial liquidity strain followed by significant improvement, but a slight decline in the most recent year.

Similarly, the quick ratio displayed a downward trend from 0.26 in 2020 to 0.07 in 2021 and further to 0.04 in 2022, indicating a potential lack of immediate liquid assets to cover current liabilities. However, there was a substantial recovery to 0.81 in 2023 and a slight increase to 0.85 in 2024, reflecting an enhanced ability to meet short-term obligations without relying on inventory.

The cash ratio mirrored the trends observed in the quick ratio, reinforcing the importance of cash and cash equivalents in assessing short-term liquidity. The ratios for 2023 and 2024 show notable improvements compared to the constrained liquidity situation seen in 2021 and 2022, indicating better cash management practices in place.

Overall, Southwest Gas Holdings Inc has shown varying levels of liquidity over the years, with improvements evident in recent periods. Continued monitoring of these ratios can provide insights into the company's financial health and its ability to effectively manage short-term financial commitments.

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Additional liquidity measure

Southwest Gas Holdings Inc's cash conversion cycle has shown fluctuating trends over the years. As of December 31, 2020, the company had an exceptionally low cash conversion cycle of 0.30 days, indicating efficient management of its working capital. However, by December 31, 2022, the cash conversion cycle had significantly increased to 201.38 days, suggesting a delay in converting its investments in inventory into cash receipts from customers. This prolonged cycle may indicate possible inefficiencies in inventory management or slower collection of accounts receivable.

By December 31, 2023, the company managed to reduce its cash conversion cycle to 6.90 days, showcasing improved working capital management practices. Finally, as of December 31, 2024, Southwest Gas Holdings Inc achieved a cash conversion cycle of 0.00 days, indicating that the company was able to convert its investments in inventory and accounts receivable into cash almost instantaneously. This may imply streamlined operations and effective management of working capital during that period.

In conclusion, the fluctuating nature of Southwest Gas Holdings Inc's cash conversion cycle highlights the company's ability to adapt and improve its working capital management strategies over the years, with a significant improvement observed from 2022 to 2024.