Emerson Electric Company (EMR)

Emerson Electric Company's liquidity ratios indicate its ability to meet short-term financial obligations.

The current ratio has shown a fluctuating trend over the past five years, ranging from a high of 2.75 in 2023 to a low of 1.09 in 2022. A current ratio above 1 indicates that the company has more current assets than current liabilities, with the ratio improving in recent years, signaling a stronger ability to cover short-term obligations.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventories from current assets. Similar to the current ratio, the quick ratio has fluctuated over the years, with a high of 2.21 in 2023 and a low of 0.67 in 2022. The quick ratio has generally been lower than the current ratio, suggesting that Emerson Electric may have relatively high levels of inventory compared to other current assets.

The cash ratio, which measures the company's ability to cover its current liabilities with cash and cash equivalents, has also shown variability over the years. While the cash ratio increased significantly in 2023 to 1.60, it decreased to 0.62 in 2024. A higher cash ratio indicates a stronger ability to settle short-term obligations immediately using cash on hand.

In summary, Emerson Electric Company's liquidity ratios have varied over the years, with the current ratio displaying a more favorable trend compared to the quick and cash ratios. It is essential for the company to maintain a strong liquidity position to ensure its ability to meet short-term financial commitments and navigate unforeseen challenges in the market.

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See also:

Emerson Electric Company Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of Emerson Electric Company has exhibited fluctuations over the past five years. It increased from 66.32 days in 2020 to 74.26 days in 2022 before decreasing to 58.00 days in 2021 and then increasing again to 95.10 days in 2023. However, in the most recent data available as of September 30, 2024, the cash conversion cycle improved to 91.82 days.

A longer cash conversion cycle indicates that the company is taking longer to convert its investments in inventory and accounts receivable back into cash, which may tie up valuable resources. It is essential for the company to effectively manage its working capital to optimize this cycle.

Overall, Emerson Electric Company should continuously assess and improve its cash conversion cycle to ensure efficient use of resources and maintain liquidity in the business operations.