Element Solutions Inc (ESI)

The liquidity ratios of Element Solutions Inc over the detailed period from June 2020 through March 2025 demonstrate a consistently strong liquidity position, with variations that suggest a generally prudent management of current assets relative to current liabilities.

The current ratio, which measures the company's ability to meet short-term obligations with its total current assets, has remained well above the generally acceptable threshold of 1.0 throughout the observed period. Starting at 3.42 in June 2020, it experienced a gradual decline over the subsequent quarters, reaching a low of approximately 2.88 in September 2021. Despite this decline, the current ratio recovered and increased to peaks such as 3.63 in March 2024 and 3.95 in March 2025, indicating that the company maintains a substantial buffer of current assets relative to its short-term liabilities. The stability and upward trend in recent years suggest improved liquidity management and potentially increased working capital efficiency.

The quick ratio, which refines the liquidity assessment by excluding inventories and other less liquid current assets, similarly maintained ratios above 1.8 throughout the period, reaching as high as 2.77 in March 2025. The ratio declined somewhat during 2021, bottoming near 1.87 at September 2021, but generally rebounded in subsequent periods, reflecting continued ability to meet immediate liabilities without relying heavily on inventory liquidation. The consistent position above 2.0 in recent periods indicates a solid liquidity cushion for immediate obligations.

The cash ratio, which provides the most stringent measure by focusing solely on cash and cash equivalents, exhibited more variability but consistently remained below 1.0 in the earlier period, with a notable low of 0.56 in March 2022. Since then, it has shown gradual improvement, surpassing the 0.9 mark in 2023 and reaching 1.45 by March 2025. This trend signifies an increasing level of liquid assets readily available to cover short-term liabilities without needing additional cash inflows.

Overall, Element Solutions Inc demonstrates robust liquidity metrics with ratios comfortably above critical thresholds, indicative of healthy short-term financial stability. The trend of recovery and growth in the latest quarters suggests an effective liquidity management strategy, ensuring sufficient liquidity for operational needs and strategic flexibility amidst varying economic conditions.

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Additional liquidity measure

The data reveals that the cash conversion cycle (CCC) of Element Solutions Inc. has experienced notable fluctuations from June 30, 2020, through March 31, 2025. Initially, the CCC was approximately 112 days as of June 30, 2020, and depicted a gradual upward trend reaching a peak of around 122 days by September 30, 2021. Throughout this period, the increase indicates that the company's operating cycle—comprising days sales of inventory, days sales outstanding, and days payable outstanding—became longer, suggesting a slight deterioration in liquidity and efficiency.

Subsequently, there was a period of notable decline; for example, the CCC decreased to approximately 109.36 days at the end of 2021 and further declined to about 98.57 days by September 30, 2022. This reduction signifies an improvement in working capital management, with the company accelerating receivables, reducing inventory days, or extending payables, thereby shortening the cycle.

However, this improved trend was not sustained, as the CCC increased again to approximately 117 days by June 30, 2023. This resurgence could imply a slowdown in collection efficiency, inventory management issues, or changes in payables terms. Between September 2023 and March 2024, the CCC briefly declined to about 97 days, approaching a more efficient cycle, but subsequently increased to approximately 124 days by June 30, 2024. The sharp rise in this period indicates a lengthening of the cash conversion cycle, potentially reflecting operational or financial adjustments that extended the period before cash inflows and outflows were realized.

In the most recent data, the CCC decreased again to roughly 113 days as of December 31, 2024, but rose slightly to approximately 98.77 days by March 31, 2025, suggesting some stabilization in working capital management.

Overall, the company's cash conversion cycle has exhibited significant variability over this period, alternating between periods of increased and decreased cycle length. The fluctuations suggest ongoing adjustments in accounts receivable, inventory, and payable management strategies, impacting the firm's liquidity and operational efficiency. Maintaining a shorter and more stable CCC could be beneficial for improving cash flow and operational agility.