Freeport-McMoran Copper & Gold Inc (FCX)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 2.42 | 2.42 | 2.46 | 2.52 | 2.72 |
| Quick ratio | 0.71 | 0.87 | 1.36 | 1.37 | 1.07 |
| Cash ratio | 0.71 | 0.87 | 1.36 | 1.37 | 1.07 |
Based on the provided data, Freeport-McMoran Copper & Gold Inc's liquidity ratios have shown some fluctuations over the years.
1. Current Ratio: The current ratio measures the company's ability to cover its short-term obligations with its current assets. Freeport-McMoran's current ratio has been above 2 over the past five years, indicating that the company has had more than enough current assets to meet its short-term liabilities. Although there has been a slight downward trend in the current ratio from 2.72 in 2020 to 2.42 in 2024, the ratio still remains at a healthy level.
2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. Freeport-McMoran's quick ratio has also fluctuated over the years, with a peak of 1.37 in 2021 and then declining to 0.71 in 2024. A quick ratio below 1 may indicate potential liquidity issues as the company may have difficulty meeting its short-term obligations without relying on selling inventory.
3. Cash Ratio: The cash ratio is the most conservative measure of liquidity, focusing solely on cash and cash equivalents to cover short-term liabilities. Freeport-McMoran's cash ratio has followed a similar pattern to the quick ratio, starting at 1.07 in 2020 and declining to 0.71 in 2024. As with the quick ratio, a cash ratio below 1 suggests that the company may struggle to meet its short-term obligations purely from cash on hand.
In summary, while Freeport-McMoran Copper & Gold Inc has generally maintained healthy liquidity ratios over the years, there has been a decline in the quick ratio and cash ratio in recent years, which may warrant further investigation into the company's ability to meet its short-term liabilities without relying heavily on inventory or cash reserves.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 139.64 | 140.93 | 125.30 | 116.99 | 121.92 |
The cash conversion cycle of Freeport-McMoran Copper & Gold Inc has shown slight fluctuations over the years. As of December 31, 2020, the company had a cash conversion cycle of 121.92 days, which decreased to 116.99 days by December 31, 2021. However, by December 31, 2022, the cycle increased to 125.30 days, and further to 140.93 days by December 31, 2023. The trend continued as of December 31, 2024, with the cycle at 139.64 days.
Overall, the increasing trend in the cash conversion cycle indicates that Freeport-McMoran Copper & Gold Inc is taking longer to convert its investments in raw materials and production to cash inflows from sales. This may suggest issues with inventory management, accounts receivable collection, or payable management that could impact the company's liquidity and working capital efficiency. Further analysis and targeted improvements in operational processes may be necessary to optimize cash flow and enhance overall financial performance.