Applied Industrial Technologies (AIT)

The liquidity ratios of Applied Industrial Technologies over the period from June 30, 2021, to June 30, 2025, exhibit a generally positive trend, indicating improvement in the company's short-term liquidity position.

The current ratio, which measures the company's ability to cover its current liabilities with its current assets, increased from 2.80 in 2021 to a peak of 3.53 in 2024 before slightly declining to 3.32 in 2025. This suggests a consistent strengthening of the company's liquidity buffer, providing a comfortable margin to meet short-term obligations.

The quick ratio, which excludes inventories from current assets to assess immediate liquidity, followed a similar upward trajectory. It rose from 1.81 in 2021 to a high of 2.39 in 2024, then moderated to 2.20 in 2025. This indicates that the company's most liquid assets are more than sufficient to cover current liabilities, reflecting prudent liquidity management and an ability to meet short-term liabilities without relying on inventory sales.

The cash ratio, representing the most conservative measure of liquidity by considering only cash and cash equivalents relative to current liabilities, demonstrated variability over the period. It declined from 0.60 in 2021 to a low of 0.37 in 2022, then recovered significantly to 0.92 in 2024 before decreasing slightly to 0.74 in 2025. The fluctuations imply periods of varying cash availability, but the overall trend shows an increase in cash holdings relative to current liabilities by 2024, which enhances liquidity resilience.

In summary, Applied Industrial Technologies has experienced a consistent strengthening of its liquidity position, with ratios indicating adequate capacity to meet its short-term obligations. The upward trend in the current and quick ratios, along with improved cash ratios, reflects effective liquidity management and a healthy short-term financial stance over the analyzed period.

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Additional liquidity measure

The analysis of Applied Industrial Technologies' cash conversion cycle (CCC) over the period from June 30, 2021, to June 30, 2025, reveals some notable trends and fluctuations.

Initially, on June 30, 2021, the company's CCC was recorded at approximately 82.74 days. Over the subsequent year, this metric increased to approximately 88.57 days by June 30, 2022, indicating a lengthening of the cycle. Such an increase suggests that, during this period, the company was taking longer to convert investments in inventory and receivables into cash, which could be due to factors such as extended receivable collection periods, increased inventory days, or changes in payables.

Conversely, by June 30, 2023, the CCC decreased to around 81.89 days, signaling an improvement in the company's operational efficiency in converting its investments into cash. This reduction implies that the company may have optimized inventory management, sped up receivable collections, or extended payables.

However, the trend reversed slightly in the following years. The CCC rose again to about 85.80 days by June 30, 2024, and continued to slightly increase to approximately 87.41 days by June 30, 2025. This gradual lengthening suggests potential operational challenges or strategic decisions that resulted in a slower cash conversion process.

Overall, the company's cash conversion cycle has fluctuated within a range of approximately 81.89 days to 88.57 days over these four years. Although the cycle has shown some variability, it has remained relatively stable around an average in the mid-80-day range, reflecting consistent operational patterns with periods of both improvement and slowdown in liquidity management.