AutoNation Inc (AN)

Autonation Inc.'s liquidity ratios have fluctuated over the past five years. The current ratio, which measures the company's ability to cover short-term liabilities with current assets, decreased from 1.00 in 2020 to 0.77 in 2023. This downward trend may indicate potential liquidity concerns as the current assets are not sufficient to cover the 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. Autonation Inc.'s quick ratio decreased from 0.37 in 2020 to 0.22 in 2023, indicating a decreasing ability to cover immediate liabilities with the most liquid assets.

The cash ratio, which reflects the company's ability to cover short-term liabilities with cash and cash equivalents, also shows a downward trend. Autonation Inc.'s cash ratio declined from 0.16 in 2020 to 0.04 in 2023, suggesting a decreasing ability to quickly meet its short-term obligations solely with cash resources.

Overall, the decreasing trend in Autonation Inc.'s liquidity ratios over the years may raise concerns about the company's short-term financial health and ability to meet its obligations promptly. Further analysis and proactive management of working capital may be necessary to improve liquidity and mitigate potential risks.

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Additional liquidity measure

The cash conversion cycle of Autonation Inc. has shown fluctuations over the past five years. In 2023, the company's cash conversion cycle increased to 59.07 days from 40.53 days in 2022, indicating a decrease in efficiency in managing cash flows. This is in contrast to the decreasing trend observed from 2020 to 2022, suggesting improvements in working capital management during those years.

Comparing 2023 to 2021, there is an evident increase in the cash conversion cycle from 35.68 days to 59.07 days. This significant increase indicates a prolonged period in converting inventory and receivables into cash, potentially leading to liquidity challenges or increased financing costs for the company.

Moreover, when looking at the data from 2020 and 2019, it is notable that there was a considerable decrease in the cash conversion cycle, from 77.47 days in 2019 to 64.23 days in 2020. This improvement demonstrates that the company was able to streamline its operations in converting assets into cash more efficiently during that period.

Overall, the trend in Autonation Inc.'s cash conversion cycle reflects varying degrees of effectiveness in managing working capital across the years, highlighting the importance of closely monitoring and optimizing cash flow processes to support the company's financial health.