Ecolab Inc (ECL)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.26 | 1.30 | 1.30 | 1.32 | 1.75 |
| Quick ratio | 0.26 | 0.21 | 0.14 | 0.10 | 0.43 |
| Cash ratio | 0.26 | 0.21 | 0.14 | 0.10 | 0.43 |
Liquidity Ratio Analysis of Ecolab Inc:
1. Current Ratio:
- Ecolab Inc's current ratio has shown a decline from 1.75 in 2020 to 1.26 in 2024.
- The current ratio indicates the company's ability to cover its short-term liabilities with its current assets.
- A current ratio above 1.0 is generally considered healthy, but the decreasing trend in Ecolab's current ratio may raise concerns about its liquidity position.
2. Quick Ratio:
- Ecolab's quick ratio has also decreased over the years, from 0.43 in 2020 to 0.26 in 2024.
- The quick ratio provides a more stringent measure of liquidity as it excludes inventory from current assets.
- A quick ratio of less than 1.0 may suggest that the company may have difficulty meeting its short-term obligations without relying on the sale of inventory.
3. Cash Ratio:
- Ecolab's cash ratio has followed a similar declining trend, falling from 0.43 in 2020 to 0.26 in 2024.
- The cash ratio is the most conservative liquidity measure, focusing solely on cash and cash equivalents to cover short-term liabilities.
- A decreasing cash ratio may indicate a reduced ability to quickly cover immediate payment obligations solely with cash on hand.
Overall Impression:
Ecolab Inc's liquidity ratios have shown a consistent decline over the years, indicating potential challenges in maintaining sufficient liquid assets to meet short-term obligations. Investors and stakeholders may need to monitor the company's liquidity position closely to ensure financial stability and solvency.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 60.08 | 59.84 | 74.10 | 71.50 | 67.93 |
Ecolab Inc's cash conversion cycle, a metric that measures the efficiency of its working capital management, has shown fluctuations over the past five years. In 2020, the company had a cash conversion cycle of 67.93 days, which increased to 71.50 days in 2021 and further to 74.10 days in 2022. However, in 2023, there was a notable improvement as the cycle decreased to 59.84 days. This trend continued positively into 2024, with a slight increase to 60.08 days.
The overall trend indicates that Ecolab Inc has been actively working to manage its working capital more effectively in recent years. Shortening the cash conversion cycle is generally favorable as it demonstrates the company's ability to efficiently convert its investments in inventory and receivables back into cash. Additionally, a shorter cash conversion cycle implies better liquidity for the company and potentially a competitive advantage in its industry. Ecolab Inc should continue to monitor and manage its working capital efficiently to sustain this positive trend.