Eastman Chemical Company (EMN)

The liquidity ratios of Eastman Chemical Co over the past five years provide insights into the company's ability to meet its short-term obligations.

1. Current Ratio: The current ratio measures the company's ability to pay its short-term liabilities with its short-term assets. A higher current ratio is generally favorable as it indicates that the company has an adequate level of current assets to cover its current liabilities. Eastman Chemical Co's current ratio has shown a declining trend, decreasing from 1.86 in 2019 to 1.35 in 2023. This downward trend may raise concerns about the company's short-term liquidity position.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. A quick ratio of 1 or higher is typically considered satisfactory. Eastman Chemical Co's quick ratio has fluctuated over the past five years, ranging from 0.58 in 2022 to 1.06 in 2020. The declining trend in recent years, with a quick ratio of 0.70 in 2023, suggests a potential weakness in the company's ability to quickly cover its short-term obligations without relying on inventory.

3. Cash Ratio: The cash ratio is the most conservative liquidity ratio, measuring the company's ability to cover its current liabilities with only its cash and cash equivalents. A higher cash ratio indicates a stronger liquidity position. Eastman Chemical Co's cash ratio has varied significantly over the past five years, reaching a high of 0.32 in 2020 and a low of 0.16 in 2019. The cash ratio of 0.25 in 2023 reflects a moderate level of liquidity but indicates that the company may need to improve its cash position to meet its short-term obligations more effectively.

In conclusion, Eastman Chemical Co's liquidity ratios suggest a mixed performance in managing its short-term liquidity over the past five years. The declining trends in the current and quick ratios raise concerns, while the varying cash ratio indicates fluctuations in the company's cash position. It would be beneficial for Eastman Chemical Co to closely monitor and possibly improve its liquidity management strategies to ensure it can meet its short-term financial commitments efficiently.

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Additional liquidity measure

The cash conversion cycle for Eastman Chemical Co has been relatively stable over the past five years, ranging from 67.68 days in 2021 to 97.84 days in 2020. In 2023, the cash conversion cycle improved slightly to 71.93 days compared to the previous year.

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 lower cash conversion cycle generally indicates that the company is able to efficiently manage its working capital and turn its assets into cash quickly.

Although there was a slight increase in the cash conversion cycle in 2020, Eastman Chemical Co managed to reduce it in subsequent years, indicating a potential improvement in its working capital management efficiency. It is important for the company to continue monitoring and managing its cash conversion cycle to ensure optimal efficiency in its operations.