Deere & Company (DE)

Deere & Company's liquidity ratios show fluctuations over the periods analyzed. The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has shown some variability but generally remains above 1, indicating a healthy liquidity position. However, there was a notable decrease in the current ratio in April 2023 and April 2024, which may warrant further investigation.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Deere & Company's quick ratio has been lower than the current ratio, indicating that a significant portion of its current assets is tied up in inventory. The quick ratio has also shown fluctuations, with occasional drops below 0.5, suggesting potential challenges in quickly converting assets into cash to meet immediate obligations.

The cash ratio, which is the most conservative liquidity ratio, focuses solely on cash and cash equivalents available to cover current liabilities. Deere & Company's cash ratio has mirrored the trend of the quick ratio, indicating that a substantial portion of its current assets comprises cash or assets easily convertible to cash. The cash ratio remains relatively stable over the periods analyzed, with only slight variations.

Overall, while Deere & Company's current ratio suggests a reasonable liquidity position, the lower quick and cash ratios signal potential challenges in quickly meeting short-term obligations without relying heavily on inventory. Further monitoring of inventory management and cash flow efficiency may be necessary to enhance the company's liquidity position.

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Additional liquidity measure

The cash conversion cycle for Deere & Company has exhibited some fluctuations over the past few years, indicating varying efficiency in managing cash flow from operating activities. The cycle represents the time it takes for a company to convert its investments in inventory into cash received from sales.

In the most recent period ending on Oct 27, 2024, the cash conversion cycle stood at 469.78 days, showing an improvement from the previous quarter. This suggests that Deere & Company was able to manage its inventories, collect receivables, and pay its payables more efficiently during this period.

However, looking back over the historical data, we observe some periods with longer cash conversion cycles, such as the one recorded on Jan 29, 2023, at 799.31 days. This prolonged cycle may indicate challenges in managing inventory levels, delays in collecting receivables, or extending payment terms to suppliers, impacting the overall cash flow efficiency.

On the other hand, the shortest cash conversion cycle was observed on Feb 2, 2020, at 65.29 days, showcasing a high level of efficiency in managing cash flow and working capital during that period.

Overall, Deere & Company's cash conversion cycle fluctuates over time, reflecting changes in operational efficiency and effectiveness in managing working capital components. Monitoring this metric can provide insights into the company's liquidity, profitability, and overall financial health.