Avery Dennison Corp (AVY)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.04 | 0.99 | 1.07 | 1.25 | 1.04 |
| Quick ratio | 0.62 | 0.56 | 0.64 | 0.79 | 0.66 |
| Cash ratio | 0.09 | 0.07 | 0.08 | 0.15 | 0.13 |
Avery Dennison Corp's liquidity ratios demonstrate the company's ability to meet short-term obligations and manage its cash flow effectively.
The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has been relatively stable over the last five years, ranging from 0.99 to 1.25. The current ratio of 1.04 as of Dec 31, 2023, indicates that the company may have just enough current assets to cover its current liabilities.
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Avery Dennison Corp's quick ratio has also been consistent, ranging from 0.56 to 0.79 over the same period. The quick ratio of 0.62 as of Dec 31, 2023, suggests that the company may struggle to cover its immediate liabilities without relying on inventory.
The cash ratio, which is the most stringent measure of liquidity as it compares cash and cash equivalents to current liabilities, has shown a decreasing trend over the last five years, declining from 0.15 in 2020 to 0.09 in 2023. This indicates that Avery Dennison Corp may have limited cash reserves compared to its current liabilities.
Overall, Avery Dennison Corp's liquidity ratios show that while the company has maintained a stable current ratio and quick ratio, its cash ratio has decreased over time, potentially indicating a need for improved cash management strategies to enhance short-term liquidity.
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 45.44 | 41.09 | 43.01 | 45.45 | 41.40 |
The cash conversion cycle of Avery Dennison Corp has shown fluctuations over the past five years. It increased from 41.40 days in 2019 to 45.44 days in 2023, with peaks in 2020 and 2023. This indicates that the company takes longer to convert its investments in inventory and receivables into cash during these years. In contrast, the cycle decreased to 41.09 days in 2022, showing efficiency in managing its working capital. Overall, Avery Dennison Corp should focus on optimizing its cash conversion cycle to enhance liquidity and profitability in the future.