ArcBest Corp (ARCB)

ArcBest Corp's liquidity ratios have shown varying trends over the past five years.

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term liabilities with its short-term assets.
- ArcBest Corp's current ratio decreased from 1.50 in 2020 to 1.01 in 2024, indicating a decline in the company's ability to meet its short-term obligations.
- While the current ratio did fluctuate during the period, it generally remained above 1, suggesting that the company had sufficient current assets to cover its current liabilities.

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.
- ArcBest Corp's quick ratio declined from 1.39 in 2020 to 0.88 in 2024, highlighting a decreasing trend in the company's ability to meet its short-term obligations without relying on inventory.
- Similar to the current ratio, the quick ratio remained above 1, indicating that the company still had an acceptable level of liquidity.

3. Cash Ratio:
- The cash ratio is the most conservative measure of liquidity, assessing the firm's ability to cover its current liabilities with cash and cash equivalents alone.
- ArcBest Corp's cash ratio fluctuated over the years but generally remained below 1, indicating that the company might face challenges in meeting its short-term obligations using only its cash reserves.
- The decreasing trend in the cash ratio from 0.73 in 2020 to 0.24 in 2024 suggests that ArcBest Corp might have experienced a decline in its cash position relative to its current liabilities.

Overall, although the liquidity ratios of ArcBest Corp showed some fluctuation over the years, the company generally maintained a level of liquidity that allowed it to meet its short-term obligations. However, the decreasing trends in both the quick ratio and cash ratio indicate a potential need for the company to closely monitor its liquidity position and take necessary actions to ensure sufficient liquidity for future operations.

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Additional liquidity measure

The cash conversion cycle is a key metric that measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. Analyzing ArcBest Corp's cash conversion cycle data from 2020 to 2024 reveals fluctuations in the efficiency of the company's working capital management.

In 2020, ArcBest Corp's cash conversion cycle was 6.18 days, indicating that the company took approximately 6 days to convert investments in inventory into cash flows from sales. Subsequently, in 2021 and 2022, the company improved its efficiency significantly, with negative cash conversion cycles of -9.24 days and -6.86 days, respectively. A negative cash conversion cycle suggests that the company receives cash from customers before paying its suppliers, improving its cash flow position.

However, in 2023 and 2024, the cash conversion cycle turned positive again at 1.85 days and 2.66 days, respectively. This suggests that ArcBest Corp took a slightly longer time to convert investments in inventory into cash flows from sales during these years compared to the previous two years. The increase in the cash conversion cycle may be attributed to changes in the company's operating cycle, supplier payment terms, or customer payment behavior.

Overall, ArcBest Corp's cash conversion cycle has shown fluctuations over the years, reflecting changes in the company's working capital management efficiency. It is essential for the company to monitor and manage its cash conversion cycle effectively to optimize its working capital utilization and cash flow generation.