Api Group Corp (APG)

The analysis of Api Group Corp's liquidity ratios over the period from December 31, 2020, to December 31, 2024, reveals significant trends and shifts in the company's short-term financial health.

The current ratio, which measures the company’s ability to cover its short-term liabilities with its current assets, exhibited an initial increase from 1.71 in 2020 to a peak of 3.03 in 2021. This indicates a substantial strengthening in liquidity during that year. However, subsequent to this peak, the current ratio declined consistently to 1.38 in 2022 and stabilized marginally around 1.41 in 2023 and 2024. Although the ratio remains above the generally considered safe threshold of 1.0, the downward trend suggests a reduction in liquidity buffer, potentially affecting the company's capacity to meet short-term obligations without additional asset conversion.

The quick ratio, which excludes inventory from current assets to assess immediate liquidity, followed a similar pattern. It rose significantly from 1.54 in 2020 to 2.51 in 2021, reflecting an enhanced ability to cover liabilities with more liquid assets. After reaching this peak, the quick ratio decreased to 1.24 in 2022 and then slightly increased to 1.28 in 2023, maintaining a relatively stable position through 2024 at 1.27. This decline indicates a reduction in readily available assets relative to current liabilities, though the ratio still remains above 1.0, signifying acceptable short-term liquidity.

The cash ratio, which measures the most stringent form of liquidity by comparing cash and cash equivalents to current liabilities, showed a notable fluctuation. It jumped from 0.61 in 2020 to a high of 1.37 in 2021, indicating that the company held sufficient cash to cover all current liabilities at that point. However, subsequent years saw a sharp decline to 0.31 in 2022 and further decreased to 0.27 in 2023, maintaining a minimal level of 0.26 in 2024. The decreasing trend suggests a substantial reduction in the company's cash reserves relative to its current liabilities, which could imply increased reliance on other short-term assets or external financing sources to meet obligations.

Overall, the liquidity ratios of Api Group Corp demonstrate a pattern of initial improvement in 2021, followed by a gradual erosion of liquidity buffers in subsequent years. While the ratios continue to indicate liquidity sufficiency (remaining above critical thresholds), the downward trends warrant attention for potential future liquidity management and prudent cash flow planning.

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Additional liquidity measure

The cash conversion cycle (CCC) of Api Group Corp exhibited an overall upward trend from December 31, 2020 to December 31, 2024. Specifically, the CCC was recorded at 68.38 days at the end of 2020, which increased marginally to 70.85 days by the end of 2021. The trend continued with an increase to 73.98 days in 2022, indicating a lengthening of the period it takes for the company to convert its investments in inventory and receivables into cash.

However, in 2023, a slight decrease was observed, with the CCC falling to 72.90 days, suggesting a small improvement in either the management of receivables, inventory, or payables. This downward movement persisted into 2024, when the CCC further declined to 71.97 days, bringing it close to the levels observed in 2021.

Overall, the data reflects a relatively stable but slightly fluctuating liquidity cycle, with the company maintaining a CCC within a narrow range of approximately 69 to 74 days over the four-year period. The marginal reductions in the later years may indicate improved operational efficiencies or adjustments in working capital management, but the overall trend suggests a cautious stance with a cyclical pattern of minor increases and decreases in the period required to convert operations into cash.