Albemarle Corp (ALB)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.95 | 1.47 | 1.89 | 1.06 | 1.22 |
| Quick ratio | 1.27 | 0.95 | 1.13 | 1.11 | 0.79 |
| Cash ratio | 0.62 | 0.30 | 0.55 | 0.71 | 0.41 |
Albemarle Corp's liquidity ratios depict the company's ability to meet short-term obligations. The current ratio, which measures current assets against current liabilities, has fluctuated over the years from 1.06 in 2021 to a peak of 1.95 in 2024. Generally, a current ratio above 1 indicates the company can comfortably cover its short-term liabilities using current assets.
The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has shown variability as well, with a low of 0.79 in 2020 and a high of 1.27 in 2024. This suggests the company's ability to meet short-term obligations without relying on selling inventory.
The cash ratio, which represents the most conservative liquidity measure by comparing cash and cash equivalents to current liabilities, has been relatively stable but fluctuates between 0.30 in 2023 and 0.71 in 2021. Although the cash ratio indicates the company's direct ability to cover immediate liabilities with cash on hand, its fluctuation may warrant further scrutiny into the company's cash management practices.
Overall, while Albemarle Corp has shown varying levels of liquidity over the years, the company generally seems to have the ability to meet its short-term obligations, as evidenced by the current, quick, and cash ratios within acceptable ranges.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 189.98 | 181.22 | 125.94 | 111.74 | 125.36 |
Based on the provided data, Albemarle Corp's cash conversion cycle has fluctuated over the years. In December 2020, the company had a cash conversion cycle of 125.36 days, which decreased to 111.74 days by December 2021, indicating an improvement in efficiency in converting its resources into cash.
However, the trend reversed in the following years, with the cash conversion cycle increasing to 125.94 days by December 2022, 181.22 days by December 2023, and further to 189.98 days by December 2024. These increases suggest that Albemarle Corp may be facing challenges in managing its working capital effectively, resulting in a longer time to convert its investments in inventory and receivables into cash.
A prolonged cash conversion cycle could indicate potential liquidity issues, as the company may be tying up cash in its operating cycle for extended periods. It may also signal inefficiencies in inventory management or difficulties in collecting receivables promptly.
Albemarle Corp should closely monitor its cash conversion cycle and explore strategies to optimize working capital management to ensure efficient operations and maintain a healthy cash position.