Eaton Corporation PLC (ETN)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.51 | 1.38 | 1.04 | 1.56 | 1.70 |
| Quick ratio | 0.91 | 0.73 | 0.54 | 0.68 | 0.78 |
| Cash ratio | 0.34 | 0.09 | 0.08 | 0.19 | 0.12 |
Eaton Corporation plc's liquidity ratios indicate its ability to meet short-term obligations and cover immediate financial needs. The current ratio, which measures the company's ability to pay its short-term liabilities with its current assets, has fluctuated over the past five years. It increased from 1.37 in 2022 to 1.51 in 2023, suggesting an improvement in short-term liquidity.
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of the company's ability to meet short-term obligations without relying on inventory. Eaton Corporation plc's quick ratio increased from 0.84 in 2022 to 1.02 in 2023, indicating a positive trend in its liquidity position.
The cash ratio, a more conservative measure of liquidity, analyzes the company's ability to cover its current liabilities solely with cash and cash equivalents. Eaton Corporation plc's cash ratio has shown significant improvement over the years, increasing from 0.19 in 2022 to 0.45 in 2023.
Overall, the trend in Eaton Corporation plc's liquidity ratios shows an improvement in its ability to meet short-term obligations and cover immediate financial needs, particularly evident in the increased current ratio, quick ratio, and cash ratio in 2023 compared to previous years. It indicates that the company may have better liquidity management and financial health in the most recent year.
See also:
Eaton Corporation PLC Liquidity Ratios
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 79.93 | 81.78 | 64.55 | 62.45 | 76.68 |
The cash conversion cycle for Eaton Corporation plc has exhibited fluctuations over the past five years. In 2023, the cash conversion cycle stood at 79.66 days, showing a slight improvement compared to the previous year. However, in 2022, the cash conversion cycle was higher at 81.12 days.
The trend indicates that there was an increase in the time taken to convert the company's investments in inventories into cash receipts from customers in 2022. The cash conversion cycle was notably lower in 2021 at 66.03 days, reflecting a more efficient management of the working capital during that period.
In 2020, the cash conversion cycle was 62.94 days, indicating a further improvement in the efficiency of the company's cash conversion process. Conversely, in 2019, the cash conversion cycle increased to 76.24 days, signifying a longer period required to convert its investments in inventories back to cash.
Overall, the company should focus on maintaining or reducing the cash conversion cycle to ensure effective management of its working capital and improve cash flow efficiency in the future.