Dover Corporation (DOV)

The liquidity ratios of Dover Corp. provide insight into the company's ability to meet its short-term financial obligations. The current ratio, which compares current assets to current liabilities, has fluctuated over the past five years, ranging from 1.23 in 2022 to 1.51 in 2020. A current ratio above 1 indicates that Dover Corp. has more current assets than current liabilities, with the latest figure at 1.40 suggesting a modest liquidity position.

The quick ratio, which excludes inventory from current assets, provides a more stringent measure of liquidity. Dover Corp.'s quick ratio has ranged from 0.74 in 2022 to 1.03 in 2020, with the latest figure at 0.82. This indicates that the company may face more difficulty in meeting its short-term obligations without relying on inventory.

The cash ratio, which only considers cash and cash equivalents against current liabilities, has shown a decreasing trend from 0.37 in 2020 to 0.22 in 2023. This suggests that Dover Corp. may have limited cash reserves relative to its current liabilities, potentially affecting its ability to cover immediate financial commitments.

Overall, Dover Corp.'s liquidity ratios indicate a somewhat stable liquidity position over the years, with the current ratio generally above 1, although the quick ratio and cash ratio suggest a more constrained liquidity situation. It would be important for the company to closely monitor its short-term liquidity and working capital management to ensure its financial health and ability to meet obligations as they come due.

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Additional liquidity measure

The cash conversion cycle of Dover Corp. has shown some fluctuations over the past five years. In 2023, the company's cash conversion cycle was 80.14 days compared to 85.08 days in 2022, indicating a slight improvement in efficiency. However, when compared to 2021 and 2020, where the cash conversion cycle was 70.89 days and 60.53 days respectively, there has been a gradual increase in the number of days it takes for the company to convert its investments in inventory and accounts receivable into cash.

The trend observed is that the cash conversion cycle has lengthened over the past five years, indicating potential issues with inventory management, sales collection, or payment practices. A longer cash conversion cycle suggests that Dover Corp. is taking longer to generate cash from its operating activities, which could impact its liquidity and working capital management.

In 2019, Dover Corp. had the shortest cash conversion cycle of 47.93 days, indicating more efficient operations in terms of converting its investments into cash. The subsequent increase in the cash conversion cycle over the following years may require a closer analysis of the company's operational efficiency and working capital management practices to identify areas for improvement and potential strategies to optimize its cash conversion cycle.