Cleveland-Cliffs Inc (CLF)

Cleveland-Cliffs Inc's liquidity ratios show a fluctuating trend over the past five years. The current ratio, a measure of the company's ability to cover short-term obligations with its current assets, improved from 1.81 in 2020 to 2.15 in 2021 before decreasing slightly to 2.09 in 2022. However, it fell to 1.89 in 2023 and then increased again to 2.08 in 2024. This indicates that the company may have had varying levels of current assets relative to current liabilities during this period.

The quick ratio, which provides a more conservative measure of liquidity by excluding inventory from current assets, also exhibits some variability. It rose from 0.45 in 2020 to 0.62 in 2021, but then dipped to 0.56 in 2022, before increasing slightly to 0.58 in 2023, and dropping to 0.49 in 2024. This suggests that Cleveland-Cliffs Inc may have had some challenges maintaining liquid assets that could cover immediate liabilities, especially in the most recent year.

The cash ratio, a stringent indicator of liquidity that considers only cash and cash equivalents relative to current liabilities, was relatively low throughout the period. It started at 0.04 in 2020, decreased to 0.01 in 2021 and 2022, surged to 0.06 in 2023, and then decreased again to 0.02 in 2024. This indicates that Cleveland-Cliffs Inc may have had limited immediate cash resources compared to its short-term liabilities, especially in 2021 and 2022.

Overall, while the current ratio shows improvements in the company's liquidity position, the quick and cash ratios reveal some inconsistency and potential challenges in maintaining highly liquid assets to cover short-term obligations. It would be beneficial for Cleveland-Cliffs Inc to focus on optimizing its liquidity management to ensure a more stable financial position in the future.

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Additional liquidity measure

The cash conversion cycle of Cleveland-Cliffs Inc has shown a significant improvement over the past few years. In December 31, 2020, the company's cash conversion cycle was 230.55 days, indicating a relatively long cycle for converting its resources into cash. However, by December 31, 2024, the cycle had decreased to 86.60 days, reflecting a notable enhancement in the efficiency of the company's cash management.

The decreasing trend in the cash conversion cycle implies that Cleveland-Cliffs Inc has been able to streamline its operations relating to inventory turnover, accounts receivable collection, and accounts payable management. This reduction in the cycle duration suggests that the company is managing its working capital more effectively, which can lead to improved liquidity and financial performance.

Overall, the declining trend in Cleveland-Cliffs Inc's cash conversion cycle from 2020 to 2024 signifies a positive development in the company's ability to convert its investments in raw materials and services into cash efficiently. It indicates a better control over its operational processes and a potential for enhanced financial stability.