Caterpillar Inc (CAT)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.42 | 1.35 | 1.39 | 1.46 | 1.53 |
| Quick ratio | 0.21 | 0.26 | 0.22 | 0.34 | 0.73 |
| Cash ratio | 0.21 | 0.26 | 0.22 | 0.34 | 0.73 |
Caterpillar Inc's liquidity ratios indicate its ability to meet short-term obligations and manage cash flow effectively. The current ratio has shown a gradual decline from 1.53 in 2020 to 1.42 in 2024, which suggests a slight weakening in the company's short-term liquidity position.
Moreover, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also decreased significantly from 0.73 in 2020 to 0.21 in 2024. This downward trend indicates a diminishing ability to cover immediate liabilities with the most liquid assets.
The cash ratio, which focuses solely on the company's cash and cash equivalents to cover current liabilities, has mirrored the decline seen in the quick ratio, dropping from 0.73 in 2020 to 0.21 in 2024.
Overall, the decreasing trend in these liquidity ratios for Caterpillar Inc raises concerns about its ability to quickly convert assets into cash to meet short-term financial obligations. Management may need to focus on optimizing working capital and implementing strategies to improve liquidity position in order to ensure financial stability and meet upcoming obligations.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 148.05 | 138.05 | 141.68 | 142.46 | 140.26 |
The cash conversion cycle of Caterpillar Inc has shown some variations over the past five years based on the provided data.
In 2020, the cash conversion cycle was 140.26 days. It slightly increased in 2021 to 142.46 days and then decreased to 141.68 days in 2022. Subsequently, in 2023, there was a notable drop to 138.05 days. However, there was an increase in 2024 to 148.05 days.
Overall, Caterpillar Inc's cash conversion cycle has fluctuated within a range over the years, indicating potential changes in its working capital management and operational efficiency. This metric measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales, and then back into cash through collections from customers. A lower cash conversion cycle indicates a faster turnover of cash, which is generally more favorable as it implies efficient management of working capital. Conversely, a longer cycle may suggest delays in converting inventory and receivables into cash, which could impact liquidity and profitability.
Further analysis of the drivers behind these fluctuations and comparative benchmarking with industry peers would provide deeper insights into Caterpillar Inc's cash management performance and potential areas for improvement.