Cummins Inc (CMI)
Liquidity ratios
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 1.31 | 1.32 | 1.34 | 1.34 | 1.18 | 1.43 | 1.40 | 1.29 | 1.27 | 1.37 | 1.66 | 1.68 | 1.74 | 1.80 | 1.81 | 1.82 | 1.88 | 1.94 | 1.42 | 1.40 |
| Quick ratio | 0.21 | 0.19 | 0.20 | 0.26 | 0.22 | 0.28 | 0.21 | 0.24 | 0.27 | 0.31 | 0.43 | 0.43 | 0.52 | 0.44 | 0.44 | 0.50 | 1.24 | 0.64 | 0.36 | 0.33 |
| Cash ratio | 0.20 | 0.19 | 0.20 | 0.26 | 0.21 | 0.28 | 0.21 | 0.20 | 0.23 | 0.28 | 0.39 | 0.37 | 0.45 | 0.44 | 0.44 | 0.50 | 0.61 | 0.58 | 0.30 | 0.29 |
Cummins Inc's liquidity ratios show a trend of fluctuation over the past few years. The current ratio, which measures the company's ability to cover its short-term liabilities with its short-term assets, has declined from 1.40 as of March 31, 2020, to 1.31 as of December 31, 2024. This suggests a slight weakening in the company's liquidity position over the period.
The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also shown a decreasing trend, dropping from 1.24 as of December 31, 2020, to 0.21 as of June 30, 2024. This indicates a significant reduction in the company's ability to meet its short-term obligations without relying on the sale of inventory.
Lastly, the cash ratio, which provides insight into the company's ability to cover its current liabilities with its cash and cash equivalents, has shown a similar downward trajectory, falling from 0.61 as of December 31, 2020, to 0.20 as of December 31, 2024. This implies that Cummins Inc has become less capable of meeting its immediate obligations using its cash reserves alone.
In conclusion, the liquidity ratios of Cummins Inc have exhibited a decreasing trend over the years, suggesting a potential liquidity challenge for the company. Monitoring these ratios closely and implementing appropriate strategies to improve liquidity may be crucial for Cummins Inc's financial health.
See also:
Additional liquidity measure
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 26.77 | 27.28 | 20.49 | 18.17 | 20.90 | 23.79 | 25.54 | 25.45 | 29.06 | 33.12 | 30.63 | 27.39 | 34.56 | 22.23 | 18.88 | 10.95 | 88.35 | 27.95 | 39.67 | 24.56 |
The cash conversion cycle of Cummins Inc has fluctuated over the years based on the provided data. The cash conversion cycle represents the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.
In analyzing the trend of Cummins Inc's cash conversion cycle, we observe that there was a significant increase in the cycle from December 31, 2020, to a peak on December 31, 2021, which reached 88.35 days. This may indicate potential inefficiencies in managing inventory, collecting receivables, or paying off payables during that period.
However, from March 31, 2021, onwards, there is a visible downward trend in the cash conversion cycle, reaching a low point of 18.17 days by March 31, 2024. This suggests improvements in managing working capital and operating efficiency.
Overall, the recent trend indicates that Cummins Inc has been successful in reducing its cash conversion cycle, which is a positive sign of more efficient operations. Further monitoring of the cash conversion cycle is recommended to ensure continued efficient management of working capital and cash flows.