Archrock Inc (AROC)

Archrock Inc's liquidity ratios indicate its ability to meet short-term obligations. The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has shown a slight decline over the years, from 1.63 in 2020 to 1.24 in 2024. While a current ratio above 1 indicates the company can meet its short-term obligations, the decreasing trend suggests a potential strain on liquidity.

The quick ratio, a more stringent liquidity measure that excludes inventory from current assets, has also decreased from 0.94 in 2020 to 0.73 in 2024. This indicates that Archrock Inc may have difficulty meeting its immediate obligations without relying on inventory sales.

The cash ratio, which focuses solely on cash and cash equivalents to cover short-term liabilities, has remained relatively stable over the years, showing a slight increase from 0.01 in 2020 to 0.02 in 2024. While the cash ratio is low, indicating a heavy reliance on non-cash current assets, the slight increase suggests a positive trend in the company's cash position.

Overall, the declining trend in both the current and quick ratios, along with the low levels of cash ratio, may signal potential liquidity challenges for Archrock Inc in the future. It would be essential for the company to closely monitor its liquidity position and take necessary steps to improve its short-term financial health.

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Additional liquidity measure

The cash conversion cycle of Archrock Inc, a measure of how efficiently the company manages its working capital, has shown some fluctuations over the past five years.

As of December 31, 2020, the company's cash conversion cycle was 68.90 days, indicating that it took approximately 68.90 days for Archrock to convert its investments in inventory and accounts receivable into cash.

By the end of December 31, 2021, the cash conversion cycle had slightly increased to 80.24 days, suggesting a longer period required for the company to convert its resources into cash.

However, in the following year, by December 31, 2022, the cash conversion cycle decreased to 77.55 days, showing some improvement in efficiency compared to the previous year.

By December 31, 2023, the cash conversion cycle further decreased to 64.11 days, which indicates a more efficient working capital management by Archrock Inc.

The most recent data as of December 31, 2024, shows the cash conversion cycle at 60.19 days, the lowest in the five-year period, signifying an improvement in the company's ability to convert its working capital into cash efficiently.

Overall, the trend suggests that Archrock Inc has been making efforts to enhance its cash conversion cycle over the years, showcasing improved efficiency in managing its working capital.