Armstrong World Industries Inc (AWI)

Armstrong World Industries Inc's liquidity ratios show a mixed performance over the years. The current ratio, which measures the company's ability to cover its short-term obligations with current assets, has fluctuated but generally remained above the industry average. It was highest in 2022 at 1.95 and lowest in 2024 at 1.40, indicating a slight decrease in liquidity over the period.

The quick ratio, a more conservative measure of liquidity that excludes inventory from current assets, also shows a downward trend. The ratio was highest in 2020 at 1.25 but dropped consistently in the following years, reaching 0.86 in 2024. This suggests a potential struggle to meet short-term obligations without relying on selling inventory.

The cash ratio, which provides the most stringent assessment of liquidity by considering only cash and cash equivalents, reflects a decline in cash holdings over the years. The ratio was highest in 2020 at 0.79 but decreased significantly to 0.32 in 2024, indicating a decreasing ability to cover short-term liabilities solely with cash on hand.

Overall, while Armstrong World Industries Inc has maintained a current ratio above 1, indicating short-term solvency, the decreasing trend in both quick ratio and cash ratio warrants attention. It suggests a potential challenge in meeting short-term obligations without relying on inventory or other current assets. The company may need to focus on improving its cash management practices and ensuring adequate liquidity to support its operations in the future.

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Additional liquidity measure

The cash conversion cycle of Armstrong World Industries Inc has shown a fluctuating trend over the past five years. Beginning at 25.87 days on December 31, 2020, it increased to 26.65 days by the end of 2021. Subsequently, the cycle continued to lengthen, reaching 28.92 days by the end of 2022 and 29.02 days by the end of 2023. However, there was a notable improvement in efficiency by the end of 2024, with the cash conversion cycle reducing to 22.24 days.

This pattern suggests that Armstrong World Industries Inc has been managing its cash conversion cycle with varying degrees of success. While the increasing trend in the cycle from 2020 to 2023 may indicate potential inefficiencies in managing cash flows, the significant drop in the cycle by the end of 2024 signifies enhanced efficiency in converting its investments in inventory back into cash. It is essential for the company to continue monitoring and optimizing its cash conversion cycle to maintain healthy liquidity levels and operational efficiency.