Southwest Gas Holdings Inc (SWX)

Southwest Gas Holdings Inc's liquidity ratios provide insights into the company's ability to meet its short-term financial obligations.

- The current ratio indicates the company's ability to cover its short-term liabilities with its current assets. In 2023, the current ratio of 1.12 shows an improvement compared to the previous year but remains relatively low, indicating that the company may have some difficulty meeting its immediate obligations.

- The quick ratio, which is a more stringent measure of liquidity, factors in only the most liquid assets to cover current liabilities. In 2023, Southwest Gas Holdings Inc's quick ratio of 1.10 also improved from the previous year, suggesting an enhanced ability to meet short-term obligations without relying on inventory or prepaid expenses.

- The cash ratio, which is the most conservative liquidity metric, represents the company's ability to cover current liabilities with its cash and cash equivalents alone. Southwest Gas Holdings Inc's cash ratio of 0.52 in 2023 has increased significantly from the previous year, indicating a stronger cash position that could help meet short-term obligations more effectively.

Overall, while the company's liquidity ratios have shown improvements in 2023, especially in the quick and cash ratios, it is important to monitor these metrics to ensure that Southwest Gas Holdings Inc maintains a strong financial position to meet its short-term commitments.

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Additional liquidity measure

The cash conversion cycle of Southwest Gas Holdings Inc has exhibited fluctuations over the past five years. The company managed to significantly improve its cash conversion cycle from -157.98 days in 2019 to -231.56 days in 2022, indicating a more efficient management of working capital during this period. However, there was a notable increase in the cash conversion cycle in 2023 to -35.11 days, possibly suggesting a change in the company's operating or financial strategies.

A negative cash conversion cycle typically indicates that Southwest Gas Holdings Inc is able to convert its resources (inventory, accounts receivable, and accounts payable) into cash quickly. In this context, the negative values across the years demonstrate that the company's operational efficiency has allowed it to collect payments from customers and manage its inventory efficiently, leading to a surplus of cash.

It is important to note that a negative cash conversion cycle can sometimes indicate aggressive practices, such as stretching payables or reducing inventory levels to artificially inflate cash flows. Therefore, careful monitoring of this metric is crucial to ensure that it reflects sustainable and healthy financial operations.