Donaldson Company Inc (DCI)

The liquidity ratios of Donaldson Company Inc. over the analyzed period indicate varying degrees of liquidity position.

The current ratio, which measures the company’s ability to meet short-term obligations using total current assets, shows fluctuations from a high of 2.23 in July 2022 to a low of 1.70 in July 2023. While the current ratio decreased after July 2022, it rose again to 1.84 in July 2024 and further to 1.93 in July 2025, suggesting a partial recovery and improvement in the company’s short-term liquidity position.

The quick ratio, which excludes inventory and other less liquid current assets from current assets, follows a similar trend. It peaked at 1.29 in July 2022, declined to 1.04 in July 2023, and then increased marginally to 1.10 in July 2024 and 1.11 in July 2025. This ratio’s decline in 2023 indicates a temporary reduction in highly liquid assets, but the subsequent increase suggests a slight strengthening of the company’s ability to meet immediate liabilities without relying on inventory sales.

The cash ratio, which measures the most liquid assets—cash and cash equivalents—relative to current liabilities, tracked a decreasing trend overall. It was at 0.37 in July 2021, decreased to 0.25 in July 2023, and then saw a modest recovery to 0.30 in July 2024 before decreasing again to 0.24 in July 2025. The relatively low and fluctuating cash ratio indicates that the company’s cash holdings comprise a small proportion of current liabilities, and the overall trend suggests a consistent reliance on other liquid assets beyond cash for short-term obligations.

In summary, Donaldson Company Inc.’s liquidity ratios experienced a decline primarily around 2023, reflecting a period of reduced liquidity buffer, particularly evident in the quick and cash ratios. However, the ratios in 2024 and 2025 show some improvement, indicating ongoing efforts to bolster short-term liquidity positions. Overall, the company has maintained ratios within reasonable ranges, though the modest cash ratio suggests a continued reliance on less liquid current assets to meet immediate obligations.

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Additional liquidity measure

The cash conversion cycle (CCC) of Donaldson Company Inc has demonstrated notable fluctuations over the specified period from July 31, 2021, to July 31, 2025. Initially, the CCC was recorded at 88.26 days as of July 31, 2021. By July 31, 2022, the cycle had lengthened to 94.78 days, indicating a slowdown in the company's efficiency in converting investments in inventory and other resources into cash flows from sales.

Subsequently, a significant reduction occurred by July 31, 2023, with the CCC decreasing to 82.00 days. This decline suggests an improvement in operational efficiency, potentially driven by optimized inventory management or faster receivables collection. The trend slightly continued into July 31, 2024, with the CCC further decreasing to 79.45 days, reflecting ongoing progress in liquidity management and cash flow conversion processes.

However, by July 31, 2025, the CCC increased again to 87.50 days. This uptick indicates a reversal in efficiency gains, possibly due to changes in inventory turnover rates, receivables collection periods, or supplier payment terms. Overall, the company's CCC has shown periods of both deterioration and improvement, with the most recent figure indicating a moderate increase compared to the previous year but remaining below the peak observed in 2022.

In summary, Donaldson Company's cash conversion cycle has exhibited cyclical behavior over the stated period, with a general trend towards improved cash flow efficiency observed in the years leading to 2024, before experiencing some regression in 2025. These variations suggest dynamic operational adjustments and changing working capital management strategies over the analyzed timeframe.