Emerson Electric Company (EMR)

Cash ratio

		Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Cash and cash equivalents	US$ in thousands	8,051,000	1,804,000	2,354,000	3,315,000	1,494,000
Short-term investments	US$ in thousands	—	—	—	—	—
Total current liabilities	US$ in thousands	5,032,000	7,777,000	6,246,000	5,785,000	5,976,000
Cash ratio		1.60	0.23	0.38	0.57	0.25

September 30, 2023 calculation

Cash ratio = (Cash and cash equivalents + Short-term investments) ÷ Total current liabilities
= ($8,051,000K + $—K) ÷ $5,032,000K
= 1.60

The cash ratio measures a company's ability to cover its short-term liabilities with its cash and cash equivalents. A higher cash ratio indicates a stronger ability to cover short-term obligations.

The trend in Emerson Electric Co.'s cash ratio shows significant fluctuation over the past five years. In 2019, the cash ratio was 0.38, indicating a relatively weaker ability to cover short-term liabilities with cash. This increased to 0.70 in 2020, reflecting an improvement in the company's liquidity position. Subsequently, the cash ratio continued to rise to 0.55 in 2021 and then saw a substantial increase to 0.43 in 2022. However, in 2023, the cash ratio showed a significant surge to 1.85, signifying a notable improvement in the company's ability to cover its short-term obligations with cash and cash equivalents.

The increase in the cash ratio from 2022 to 2023 suggests that Emerson Electric Co. significantly enhanced its liquidity position. This improvement may provide the company with more flexibility to meet its short-term financial obligations and pursue potential investment opportunities. However, it's essential to consider the company's overall financial health and other liquidity measures in conjunction with the cash ratio to gain a comprehensive understanding of its liquidity position.