Using the ratios and information given below for PepCo Company, analyze the short-term liquidity of the firm

2015 2014
Current ratio .86 .80
Quick ratio .65 .61
Cash flow liquidity ratio .69 .62
Average collection period 32 days 30 days
Days inventory held 74 days 74 days
Days payable outstanding 157days 163 days
Cash conversion cycle (51 days) (59 days)
Cash flow from operations (in millions) $2,508 $2,232
Net sales (in millions) $13,957 $13,074
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What will be an ideal response?

PepCo's current, quick, and cash flow liquidity ratios are all below one. The firm has fewer current assets and fewer liquid items than the current liability amounts each year. The ratios have increased slightly from 2014 to 2015 . The average collection period is good and stable. The inventory days held is steady at 74 days, but without an industry average it is difficult to assess if the firm could shorten the time inventory is held. Of concern is the long time it takes PepCo to pay its suppliers. At more than five months the firm risks losing a quality supplier if they are not paying bills on time. The high days payable outstanding is the reason that the cash conversion cycle is negative. While this is beneficial to PepCo to keep their cash on hand longer, it could be a problem as mentioned if suppliers are not satisfied in a timely manner. Both sales and cash from operations are increasing which is a positive sign that the firm is able to cover debts as they come due.