American Axle & Manufacturing (AXL)

Liquidity ratios

Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020
Current ratio 1.63 1.65 1.68 1.69 1.67 1.71 1.71 1.67 1.66 1.69 1.69 1.77 1.78 1.82 1.69 1.90 1.92 1.87 1.56 1.68
Quick ratio 0.47 0.42 0.41 0.38 0.43 0.49 0.42 0.39 0.43 0.39 0.41 0.46 0.51 0.50 0.51 0.58 0.57 0.53 0.71 0.56
Cash ratio 0.47 0.42 0.41 0.38 0.43 0.49 0.42 0.39 0.43 0.39 0.41 0.46 0.51 0.50 0.51 0.58 0.57 0.53 0.71 0.56

American Axle & Manufacturing's liquidity ratios indicate that the company generally maintains a healthy level of liquidity over the years. The current ratio, which measures the company's ability to cover short-term liabilities with its current assets, fluctuates within a reasonable range, with a high of 1.92 in December 2020 and a low of 1.63 in December 2024. This suggests that the company has enough current assets to cover its short-term obligations.

However, the quick ratio, also known as the acid-test ratio, shows a declining trend over the years, indicating a decrease in the company's ability to meet its short-term obligations using its most liquid assets. The ratio ranges from 0.38 in March 2024 to 0.71 in June 2020, with a general downward trajectory.

The cash ratio, which is the most conservative liquidity ratio as it only considers cash and cash equivalents, follows a similar pattern to the quick ratio, further highlighting a potential concern in the company's ability to meet immediate financial obligations with its most liquid assets.

Overall, while the current ratio suggests that American Axle & Manufacturing has a comfortable level of liquidity to cover its short-term liabilities, the decreasing trend in the quick ratio and cash ratio raises a flag regarding the company's ability to meet its short-term obligations using only its most liquid assets.

Additional liquidity measure

Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020
Cash conversion cycle days 29.73 30.66 30.42 31.16 32.15 31.28 32.80 32.73 33.22 32.83 36.90 33.58 33.78 33.60 30.96 29.54 28.58 27.62 29.49 27.27

The cash conversion cycle of American Axle & Manufacturing has shown some fluctuations over the periods provided. Generally, a lower cash conversion cycle is preferred as it indicates that the company is able to convert its investments in inventory back into cash more quickly.

From March 31, 2020, to December 31, 2024, the cash conversion cycle increased from 27.27 days to 29.73 days but displayed some variability in between. Notably, the cycle peaked at 36.90 days on June 30, 2022, before declining again.

The company's ability to manage its cash conversion cycle effectively can be impacted by various factors such as inventory management practices, accounts receivable collection efficiency, and accounts payable terms. Analyzing the trend in the cash conversion cycle can provide insights into the company's operational efficiency and liquidity management.

It would be beneficial for American Axle & Manufacturing to closely monitor and potentially optimize its working capital management processes to ensure a more consistent and efficient cash conversion cycle, which can ultimately contribute to the company's overall financial health and stability.