Axalta Coating Systems Ltd (AXTA)

The liquidity ratios of Axalta Coating Systems Ltd have shown some fluctuations over the past five years.

1. Current ratio: This ratio measures the company's ability to cover its short-term liabilities with its current assets. Axalta's current ratio has been relatively stable ranging from 1.93 to 2.48 over the past five years. A current ratio above 1 indicates that the company has more current assets than current liabilities, which is generally considered healthy. However, a ratio that is too high may indicate an inefficient use of assets.

2. Quick ratio: The quick ratio, also known as the acid-test ratio, is a more stringent measure of liquidity as it excludes inventory from current assets. Axalta's quick ratio has also varied over the years, with a range of 1.34 to 2.00. A quick ratio above 1 indicates that the company can cover its short-term obligations without relying on the sale of inventory.

3. Cash ratio: The cash ratio represents the most conservative measure of liquidity, as it considers only cash and cash equivalents to cover current liabilities. Axalta's cash ratio has shown a decreasing trend from 1.26 in 2020 to 0.57 in 2023. A cash ratio above 1 implies that the company has more cash on hand than current liabilities, which may be considered a strong position. However, a declining trend may raise concerns about the company's ability to meet its short-term obligations solely through cash reserves.

In conclusion, Axalta Coating Systems Ltd has maintained relatively healthy liquidity ratios over the years, with current and quick ratios generally above 1 and the cash ratio above 1 in earlier years. However, the declining cash ratio in recent years may warrant further monitoring to ensure the company's ability to meet its short-term obligations with available cash reserves.

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Additional liquidity measure

The cash conversion cycle of Axalta Coating Systems Ltd has shown some fluctuations over the past five years. In 2023, it increased to 90.36 days compared to the previous year, indicating a slightly longer time taken to convert its investments in raw materials and other inputs into cash receipts from sales. This suggests that the company may be experiencing challenges in efficiently managing its working capital.

Although there was a slight increase in 2023, the cash conversion cycle has generally been around 80-90 days over the past five years, with the lowest cycle of 78.99 days observed in 2021. This indicates that the company has been able to maintain a relatively stable performance in terms of managing its cash inflows and outflows within a reasonable time frame.

Overall, Axalta Coating Systems Ltd should continue monitoring its cash conversion cycle closely to ensure efficient utilization of its resources and optimize its working capital management strategies for sustained financial health and liquidity.