American Airlines Group (AAL)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 0.54 | 0.62 | 0.71 | 0.91 | 0.67 |
| Quick ratio | 0.37 | 0.44 | 0.52 | 0.73 | 0.50 |
| Cash ratio | 0.29 | 0.34 | 0.42 | 0.65 | 0.42 |
Based on the provided data, we can analyze the liquidity ratios of American Airlines Group over the years.
1. Current Ratio: The current ratio indicates the company's ability to cover its short-term liabilities with its short-term assets. American Airlines Group's current ratio has shown some improvement from 0.67 in 2020 to 0.91 in 2021 but has since declined to 0.54 in 2024. While the current ratio in 2021 seemed relatively healthy, the decreasing trend in the following years suggests that the company's short-term liquidity position has weakened.
2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. American Airlines Group's quick ratio has shown fluctuations over the years, ranging from 0.37 in 2024 to 0.73 in 2021. The declining trend in the quick ratio indicates a potential difficulty for the company to meet its short-term obligations without relying on inventory.
3. Cash Ratio: The cash ratio measures the company's ability to cover its current liabilities with its cash and cash equivalents. American Airlines Group's cash ratio has also decreased over the years, from 0.65 in 2021 to 0.29 in 2024. This declining trend suggests that the company may have limited cash reserves to meet its immediate obligations.
In summary, the liquidity ratios of American Airlines Group have generally deteriorated over the years, indicating a potential liquidity risk for the company. Management should closely monitor and manage its liquidity position to ensure the ability to meet its short-term obligations.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 15.38 | 15.18 | 17.97 | 19.89 | 37.87 |
The cash conversion cycle of American Airlines Group has shown a decreasing trend over the past five years, indicating an improvement in the company's management of working capital.
As of December 31, 2020, the company had a cash conversion cycle of 37.87 days, which decreased to 19.89 days by December 31, 2021. This significant reduction continued with further improvements to 17.97 days by December 31, 2022, and 15.18 days by December 31, 2023. By the end of December 31, 2024, the cash conversion cycle slightly increased to 15.38 days, which is still notably lower compared to the initial period.
This downward trajectory in the cash conversion cycle suggests that American Airlines Group has been streamlining its operations to efficiently manage its cash flow and working capital. A shorter cash conversion cycle typically indicates that the company is able to convert its investments in inventory and accounts receivable into cash quickly, thereby enhancing its liquidity position and potentially lowering its financing costs.