Baker Hughes Co (BKR)

Based on the provided data for Baker Hughes Co, the liquidity ratios show the following trends:

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term liabilities with its short-term assets.
- Baker Hughes Co's current ratio has been fairly stable over the years, ranging from 1.25 to 1.65. A ratio above 1 indicates that the company has more current assets than current liabilities, which is generally a positive sign for liquidity.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets.
- Baker Hughes Co's quick ratio has shown some fluctuation, but generally remains above 1, ranging from 0.78 to 1.09. This suggests that the company can meet its short-term obligations without relying on selling inventory.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity ratio, focusing solely on cash and cash equivalents to cover short-term liabilities.
- Baker Hughes Co's cash ratio has also fluctuated but generally remained above 0.24, indicating that the company has a sufficient cash position to meet its immediate financial obligations.

Overall, Baker Hughes Co's liquidity ratios demonstrate a relatively healthy liquidity position, with the current ratio consistently above 1, the quick ratio showing resilience, and the cash ratio indicating a reasonable cash position. However, a downward trend in these ratios over time may warrant further investigation into the company's liquidity management and financial health.

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Additional liquidity measure

The cash conversion cycle for Baker Hughes Co has shown a fluctuating trend over the past five years. In 2020, the company had a cash conversion cycle of 118.41 days, indicating that on average, it took approximately 118.41 days for the company to convert its investments in inventory and other resources into cash from sales.

However, in subsequent years, namely 2021 and 2022, the cash conversion cycle increased to 131.87 days and 136.94 days, respectively. This suggests a slower conversion of investments into cash, which may indicate challenges in managing inventory levels, collecting receivables, or efficiently utilizing payables.

The trend took a concerning turn in 2023 when the cash conversion cycle significantly increased to 172.44 days. This substantial increase may indicate potential liquidity issues or inefficiencies in the company's working capital management.

In 2024, Baker Hughes Co managed to bring down the cash conversion cycle to 142.62 days, although it still remained elevated compared to the earlier years. It is essential for the company to closely monitor and improve its cash conversion cycle to ensure optimal management of working capital and sustainable operations.

Overall, the fluctuating trend in Baker Hughes Co's cash conversion cycle raises the importance of effective working capital management to enhance liquidity, streamline operational efficiency, and ultimately support the company's financial health and performance.