Adient PLC (ADNT)

The liquidity ratios of Adient PLC, as reflected in the current, quick, and cash ratios, show varying trends over the past five years.

The current ratio, which measures the firm's ability to cover short-term obligations with its current assets, has declined from 1.45 in 2021 to 1.11 in 2024. A current ratio above 1 indicates that the company has sufficient current assets to cover its current liabilities. A declining trend in the current ratio may raise concerns about the company's ability to meet its short-term obligations.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Adient PLC's quick ratio has decreased from 0.53 in 2021 to 0.26 in 2024. A quick ratio below 1 may indicate potential difficulties in meeting immediate financial obligations without relying on the sale of inventory.

The cash ratio, which is the most conservative liquidity measure as it considers only cash and cash equivalents, has followed a similar downward trend, declining from 0.53 in 2021 to 0.26 in 2024. A cash ratio below 1 suggests that Adient PLC may not have enough cash on hand to cover its short-term liabilities.

Overall, the declining trends in all three liquidity ratios of Adient PLC indicate a potential deterioration in the company's liquidity position over the past five years. It is essential for the company to closely monitor its liquidity management to ensure it can meet its short-term obligations and maintain financial stability.

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Additional liquidity measure

The cash conversion cycle measures how long it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A negative cash conversion cycle indicates that the company is able to collect cash from its customers before paying its suppliers.

Analyzing the data for Adient PLC from 2020 to 2024, we notice a generally improving trend in the cash conversion cycle. In 2020, the company had a negative cash conversion cycle of -45.15 days, indicating efficient management of its working capital. This improved further in subsequent years, reaching -32.77 days in 2021, suggesting an even faster conversion of resources into cash.

In 2022 and 2023, the cash conversion cycle continued to decrease to -41.81 days and -42.82 days, respectively, indicating that the company was managing its cash flow more effectively. The most recent data for 2024 shows a further improvement to -47.59 days, which suggests that Adient PLC has been successful in optimizing its working capital management.

Overall, the trend of decreasing cash conversion cycle over the years indicates that Adient PLC has been efficient in managing its working capital, converting resources into cash at a faster pace. This efficiency can lead to improved liquidity, profitability, and overall financial health for the company.