Archrock Inc (AROC)

The liquidity ratios of Archrock Inc reflect the company's ability to meet short-term obligations and manage its immediate financial needs.

The current ratio, which measures the company's ability to cover current liabilities with current assets, has shown a declining trend over the past five years, decreasing from 1.67 in 2019 to 1.40 in 2023. This indicates that the company may be less able to cover its short-term obligations with its current assets.

Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also decreased over the past five years, from 1.14 in 2019 to 0.86 in 2023. This suggests that Archrock Inc may have limitations in meeting its short-term obligations without relying on inventory.

The cash ratio, which highlights the company's ability to cover current liabilities with only cash and cash equivalents, has fluctuated over the years but shows a decreasing trend overall. From 2019 to 2023, the cash ratio decreased from 0.09 to 0.05, indicating a reduced ability to meet short-term obligations solely with available cash.

Overall, the declining trend in liquidity ratios suggests that Archrock Inc may be facing challenges in maintaining sufficient levels of liquid assets to cover its short-term liabilities. It is crucial for the company to closely monitor and manage its liquidity position to ensure financial stability and fulfill its financial obligations timely.

---

Additional liquidity measure

The cash conversion cycle of Archrock Inc has shown improvement over the past five years. The company's cash conversion cycle decreased from 66.17 days in 2019 to 62.58 days in 2023. This indicates that Archrock has become more efficient in managing its cash flow and working capital during this period.

A lower cash conversion cycle is generally favorable, as it signifies that the company is able to collect cash from customers, convert inventory into sales, and pay suppliers more quickly. This improvement in the cash conversion cycle suggests that Archrock has been able to streamline its operations, manage inventory more effectively, and enhance its receivables collection process.

Overall, the trend of declining cash conversion cycle demonstrates a positive development in Archrock's working capital management and operational efficiency, which can contribute to the company's financial health and profitability in the long term.