Essential Utilities Inc (WTRG)

Essential Utilities Inc's liquidity ratios have shown a declining trend over the past five years. The current ratio, which measures the company's ability to meet short-term obligations with current assets, has decreased from 6.31 in 2019 to 0.62 in 2023. This indicates that the company may have difficulty meeting its short-term liabilities with its current assets.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also decreased from 6.25 in 2019 to 0.48 in 2023. This suggests that Essential Utilities Inc may struggle to cover its short-term obligations without relying on inventory.

Furthermore, the cash ratio, which reflects the company's ability to cover its current liabilities with cash and cash equivalents, has fluctuated over the years but generally remained low. In 2023, the cash ratio improved to 0.17 from 0.07 in 2022, which may indicate a better ability to cover short-term obligations with cash on hand.

Overall, the declining trend in Essential Utilities Inc's liquidity ratios raises concerns about its short-term financial health and ability to meet immediate obligations. Management should closely monitor these ratios and take appropriate actions to improve liquidity in order to ensure the company's ongoing financial stability.

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Additional liquidity measure

The cash conversion cycle measures the efficiency of Essential Utilities Inc in managing its cash flow from the acquisition of inventory to the collection of accounts receivable. A negative cash conversion cycle indicates that the company is able to collect cash from sales before having to pay its suppliers, which is generally a favorable sign of efficient operations.

In 2023, Essential Utilities Inc experienced a notable decrease in its cash conversion cycle to -68.76 days, reflecting an improvement from the previous year. This indicates that the company is able to convert its inventory and accounts receivable into cash more quickly than paying its accounts payable, resulting in a negative cycle that suggests strong working capital management.

In contrast, the company had a positive cash conversion cycle in 2020 and 2019, indicating that it took longer to convert its resources into cash compared to paying its obligations. However, the cycle improved significantly in 2022 and 2023, demonstrating enhanced efficiency in cash conversion.

Overall, Essential Utilities Inc's cash conversion cycle has shown fluctuations over the years, but the recent trend towards a negative cycle is a positive indicator of the company's ability to efficiently manage its working capital and cash flow operations.