American Axle & Manufacturing (AXL)

American Axle & Manufacturing Holdings Inc's liquidity ratios provide insight into its ability to meet short-term obligations and manage its cash resources effectively.

The current ratio, which measures the company's ability to cover short-term liabilities with its current assets, has remained relatively stable over the past five years, ranging from 1.66 to 1.92. With a current ratio of 1.67 in 2023, the company continues to maintain a healthy level of current assets to meet its short-term liabilities.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. The trend shows a slight decline from 1.45 in 2019 to 1.27 in 2023. This indicates that the company may be relying more on inventory to meet its short-term obligations, which could be a point of concern.

The cash ratio, which measures a company's ability to cover its current liabilities with its cash and cash equivalents, has fluctuated over the years but remained above 0.5, demonstrating that the company has a sufficient cash position to cover its current liabilities. However, the decline from 0.78 in 2020 to 0.59 in 2023 suggests that the company might be using its cash resources less efficiently in recent years.

In conclusion, while American Axle & Manufacturing Holdings Inc maintains a relatively strong liquidity position, with a current ratio above 1.5 in 2023, there are some signs of potential concerns, such as a declining quick ratio and cash ratio. Management should continue to monitor these ratios to ensure the company's liquidity remains robust.

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Additional liquidity measure

The cash conversion cycle for American Axle & Manufacturing Holdings Inc has fluctuated over the past five years. In 2023, the company's cash conversion cycle improved to 29.67 days from 32.25 days in 2022. This indicates that the company took fewer days to convert its investments in inventory and accounts receivable into cash during the most recent year.

Comparing the current cycle to historical data, it can be observed that the cash conversion cycle was relatively lower in 2019 at 29.36 days. The cycle increased in 2020 and 2021 before showing signs of improvement in the most recent years.

Overall, a lower cash conversion cycle is generally seen as favorable as it signifies that the company is efficiently managing its working capital by quickly converting its investments into cash. It is essential to monitor the trend of the cash conversion cycle over time to assess the company's operational efficiency and liquidity management.