AutoNation Inc (AN)

AutoNation Inc's liquidity ratios have shown a declining trend over the years.

1. Current Ratio: The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, decreased from 1.00 in December 2020 to 0.74 in December 2024. This indicates a decreasing ability to meet short-term obligations.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. AutoNation Inc's quick ratio dropped from 0.14 in December 2020 to 0.01 in December 2024, indicating a significant decrease in its ability to meet immediate short-term obligations without relying on inventory.

3. Cash Ratio: The cash ratio, which specifically looks at the company's ability to cover short-term obligations with its cash and cash equivalents, exhibited a similar declining trend, falling from 0.14 in December 2020 to 0.01 in December 2024. This suggests a reduced capacity to cover short-term obligations solely with cash.

Overall, AutoNation Inc's liquidity position has weakened over the years as indicated by the declining current, quick, and cash ratios. Monitoring and improving liquidity ratios are crucial for ensuring the company's ability to meet its short-term financial obligations.

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Additional liquidity measure

AutoNation Inc's cash conversion cycle, which represents the time taken to convert inventory into cash, has shown fluctuations over the years. In December 2020, the cash conversion cycle was 56.38 days, indicating a longer period to convert inventory into cash.

However, there was a significant improvement in efficiency by December 2021, with the cash conversion cycle decreasing to 32.29 days. This suggests better management of inventory and accounts receivable, leading to a quicker conversion of assets into cash.

In December 2022, the cash conversion cycle increased slightly to 34.42 days but remained relatively efficient compared to the previous years. By December 2023, the cash conversion cycle extended to 50.75 days, indicating a slowdown in converting inventory to cash.

The trend continued in December 2024, with the cash conversion cycle rising further to 55.80 days. This may imply challenges in inventory management or delays in collecting accounts receivable.

Overall, fluctuations in the cash conversion cycle suggest variability in AutoNation Inc's working capital efficiency and operational performance over the years, highlighting the need for continuous monitoring and improvement in managing cash flows.