AAR Corp (AIR)

The liquidity ratios of AAR Corp over the period from May 31, 2021, to May 31, 2025, demonstrate a generally stable and improving liquidity position, with some fluctuations.

The current ratio, which measures a company's ability to cover its short-term obligations with its current assets, shows an upward trend. It increased from 2.78 in 2021 to 2.89 in 2022, further rising to 3.12 in 2023. This indicates an improved capacity to meet short-term liabilities with total current assets during this period. Subsequently, the ratio experienced a slight decline to 2.98 in 2024 and further to 2.72 in 2025, but remained comfortably above the generally accepted threshold of 2.0, suggesting consistent liquidity strength.

The quick ratio, which refines liquidity assessment by excluding inventories from current assets, also exhibits an overall improvement. It increased from 0.86 in 2021 to 0.98 in 2022 and reached 1.13 in 2023, reflecting a better position to satisfy short-term liabilities with the most liquid assets. Thereafter, it declined slightly to 1.01 in 2024 but increased again to 1.09 in 2025, maintaining a stable and above-unit ratio level indicative of prudent liquidity management.

The cash ratio, a more conservative liquidity measure considering only cash and cash equivalents, remained relatively low but showed incremental growth over the period. It was steady at 0.15 in 2021 and 2022, increased modestly to 0.19 in 2023, then decreased to 0.13 in 2024 before rising again to 0.20 in 2025. These figures suggest that while AAR Corp maintains a modest cash buffer relative to its current liabilities, it exhibits some capacity to meet immediate obligations with cash reserves.

Overall, AAR Corp’s liquidity ratios depict a company with a solid short-term liquidity position that improved considerably through 2021 to 2023, with a slight moderation afterward but remaining within comfortable margins. The ratios reflect effective liquidity management, with the company maintaining sufficient current and liquid assets to meet its short-term financial commitments.

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Additional liquidity measure

The data shows the cash conversion cycle (CCC) for AAR Corp over a five-year period, with measurements taken annually on May 31 each year. In 2021, the CCC was 162.34 days, indicating that, on average, it took approximately 162 days for the company to convert its investments in inventory and other resources into cash flows from sales.

In 2022, the CCC decreased slightly to 153.14 days, reflecting a modest improvement in the company's operational efficiency or working capital management. This downward trend continued into 2023, with the CCC marginally increasing to 153.80 days, suggesting a stabilization of cycles within this period.

However, a notable reduction occurred in 2024, when the CCC dropped significantly to 160.90 days, reversing the earlier gradual decline. Despite this increase, the 2024 figure remained below the 2021 value, indicating an overall improvement compared to the beginning of the observed period.

A further and substantial decrease is observed in 2025, where the CCC plummeted to 64.99 days. This sharp reduction signifies a considerable acceleration in the company's cash conversion process, implying that AAR Corp managed to drastically shorten the time it takes to turn inventory and receivables into cash within this period.

Overall, the trend suggests that AAR Corp has been progressively enhancing its working capital management efficiencies, culminating in a significant reduction in the cash conversion cycle by May 2025. This improvement could be attributed to better inventory turnover, faster receivables collection, or optimized payable management, contributing positively to the company's liquidity and operational effectiveness.