Eastman Chemical Company (EMN)

The current ratio of Eastman Chemical Company has shown a gradual decline over the years, starting at 1.74 in 2020 and decreasing to 1.51 in 2024. This indicates that the company may be facing challenges in meeting its short-term obligations as its current assets are becoming less sufficient to cover its current liabilities.

Furthermore, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also decreased from 0.28 in 2020 to 0.31 in 2024. This suggests that the company's ability to meet its immediate obligations with its most liquid assets has slightly improved over the years.

The cash ratio, which is the most conservative measure of liquidity as it considers only cash and cash equivalents, has followed a similar trend as the quick ratio, decreasing from 0.28 in 2020 to 0.31 in 2024. This indicates that Eastman Chemical Company has been maintaining a relatively stable level of cash to cover its current liabilities over the years.

Overall, while the current ratio has declined, the quick and cash ratios have remained relatively steady or slightly improved, suggesting that Eastman Chemical Company may have been managing its liquidity effectively by maintaining a sufficient level of liquid assets to meet its short-term obligations.

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Additional liquidity measure

The cash conversion cycle of Eastman Chemical Company has shown fluctuations over the past five years. As of December 31, 2020, the company's cash conversion cycle was 77.46 days, indicating the average number of days it takes for the company to convert its investments in raw materials into cash from sales. Over the subsequent years, the cash conversion cycle improved, reaching its lowest level on December 31, 2021, at 68.83 days.

However, in the following years, the trend reversed, with the cash conversion cycle increasing to 81.88 days as of December 31, 2022, and further to 85.93 days by December 31, 2023. The cycle significantly lengthened to 102.32 days by December 31, 2024.

This trend suggests that Eastman Chemical Company may be facing challenges in efficiently managing its working capital and converting its investments into cash. The company may need to focus on streamlining its operations, optimizing inventory management, and improving its accounts receivable and payable processes to shorten its cash conversion cycle and enhance liquidity.