CNH Industrial N.V. (CNH)

The liquidity ratios of CNH Industrial N.V. have shown significant fluctuations over the past five years. In terms of the current ratio, which measures the company's ability to cover its short-term obligations with its current assets, there has been a notable increase from 40.30 in 2019 to 441.25 in 2023. This indicates a substantial improvement in the company's short-term liquidity position.

Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also displayed an upward trend from 15.28 in 2019 to 185.75 in 2023. This suggests that CNH Industrial N.V. has enhanced its ability to meet immediate financial obligations without relying on selling inventory.

Moreover, the cash ratio, which evaluates the company's capacity to cover its short-term liabilities with cash and cash equivalents, has mirrored the same positive trajectory, rising from 15.28 in 2019 to 185.75 in 2023. This signifies an increase in the company's cash reserves relative to its short-term liabilities.

Overall, the liquidity ratios of CNH Industrial N.V. have shown substantial improvement over the years, indicating a strengthened capacity to meet short-term financial commitments and manage liquidity effectively.

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Additional liquidity measure

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A shorter cash conversion cycle is generally favorable as it indicates that the company is efficiently managing its working capital.

Looking at the trend for CNH Industrial N.V. over the past five years, we observe fluctuations in the cash conversion cycle.

In 2023, the cash conversion cycle increased to 120.20 days compared to the previous year, indicating a potential slowdown in the company's ability to convert resources into cash. This could be a cause for concern as it may imply inefficiencies in managing working capital.

In 2022, there was a slight improvement in the cash conversion cycle to 104.54 days, suggesting better working capital management compared to the previous year. However, it is important to note that the cycle still remained relatively high.

In 2021, the cash conversion cycle was 109.07 days, indicating a moderate level of efficiency in converting resources into cash flows. Although there was a slight improvement from the previous year, it is essential for the company to further optimize its working capital to enhance liquidity.

In 2020, there was a significant increase in the cash conversion cycle to 197.10 days, which could be a red flag signaling potential issues in working capital management. A longer cash conversion cycle may indicate delays in collecting receivables or managing inventory efficiently.

In 2019, the cash conversion cycle stood at 118.40 days, showing relatively efficient working capital management compared to the following year. This suggests that the company had previously been more effective in converting resources into cash flows.

Overall, CNH Industrial N.V. should focus on optimizing its cash conversion cycle to ensure smoother cash flows and improve overall liquidity and operational efficiency. Continuously monitoring and managing working capital effectively will be crucial for the company's financial health and performance.