Cabot Corporation (CBT)

The liquidity ratios of Cabot Corp. indicate the company's ability to meet its short-term obligations.

The current ratio has shown fluctuation over the past five years, ranging from a low of 1.24 in 2021 to a high of 2.02 in 2019. The ratio has improved in 2023, standing at 1.98, indicating that the company's current assets are nearly double its current liabilities. This suggests an improved ability to cover short-term obligations.

The quick ratio, which measures the company's ability to meet short-term obligations with its most liquid assets, also displays an upward trend over the years, reaching 1.27 in 2023. This indicates that Cabot Corp. has an increased ability to meet short-term liabilities without relying on the sale of its inventory.

The cash ratio, which focuses solely on the company's ability to cover its current liabilities with its cash and cash equivalents, has also improved in 2023, standing at 0.42. This signifies that the company has a higher proportion of cash reserves to cover its short-term obligations compared to previous years.

Overall, the upward trend in these liquidity ratios suggests that Cabot Corp. has been strengthening its position to meet short-term obligations effectively. However, the company should continue to monitor and manage its liquidity position to ensure it remains robust.

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Additional liquidity measure

The cash conversion cycle (CCC) of Cabot Corp. has fluctuated over the past five years. In 2023, the CCC was 81.88 days, which was a slight improvement from 2022 when it stood at 84.53 days. However, compared to 2021 and 2020, the CCC was higher in 2023. This trend indicates that Cabot Corp. took longer to convert its investments in inventory and receivables into cash in 2023 compared to the prior years.

The increase in the CCC from 2020 to 2021 suggests the company may have experienced challenges in managing its inventory and collecting receivables, leading to a longer cash conversion cycle. Subsequently, there was a decrease in the CCC from 2021 to 2022, indicating that the company improved its working capital management in the short term. However, the CCC increased again in 2023, albeit to a lesser extent than the previous year.

Overall, the fluctuations in the cash conversion cycle suggest that Cabot Corp. may benefit from focusing on more efficient management of its inventory and receivables to shorten the time it takes to convert resources into cash. Understanding and addressing the factors contributing to the fluctuations in the CCC will be essential for the company to maintain healthy cash flow and working capital efficiency.