General Dynamics Corporation (GD)

General Dynamics Corp.'s liquidity ratios provide insight into the company's ability to meet its short-term obligations.

1. Current Ratio:
The current ratio measures the company's ability to cover its short-term liabilities with its current assets. Over the past five years, General Dynamics Corp.'s current ratio has been relatively stable, ranging from 1.18 to 1.44. A current ratio above 1 indicates that the company has more current assets than current liabilities, which is generally considered favorable. General Dynamics Corp.'s current ratio has generally been healthy, with the latest ratio of 1.44 (as of Dec 31, 2023) suggesting that the company has a sufficient level of current assets to cover its short-term obligations.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. General Dynamics Corp.'s quick ratio has also been relatively stable over the past five years, ranging from 0.80 to 1.05. A quick ratio above 1 indicates that the company can meet its short-term liabilities without relying on the sale of inventory. The latest quick ratio of 0.92 (as of Dec 31, 2023) suggests that General Dynamics Corp. may have a lower ability to cover its short-term obligations without relying on inventory.

3. Cash Ratio:
The cash ratio is the most stringent liquidity measure as it considers only cash and cash equivalents to cover current liabilities. General Dynamics Corp.'s cash ratio has shown variability over the past five years, ranging from 0.12 to 0.29. A cash ratio of 0.25 (as of Dec 31, 2023) indicates that the company has improved its ability to meet short-term obligations with cash and cash equivalents compared to previous years.

Overall, General Dynamics Corp. demonstrates a generally healthy liquidity position based on its current, quick, and cash ratios. However, the trend in the quick ratio may warrant closer monitoring to ensure the company's ability to meet short-term obligations without relying on inventory.

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See also:

General Dynamics Corporation Liquidity Ratios

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Additional liquidity measure

General Dynamics Corp.'s cash conversion cycle has exhibited fluctuations over the past five years. The company's cash conversion cycle increased to 151.20 days as of December 31, 2023, compared to 141.88 days in the previous year. This indicates that General Dynamics took longer to convert its investments in inventory into cash receipts and then collect receivables from customers over this period. The increase in the cash conversion cycle may be attributed to a variety of factors such as changes in inventory management practices, credit policies, or sales trends.

Looking further back, the cash conversion cycle was relatively stable between 2020 and 2022, fluctuating between 134.22 days and 141.29 days. This consistency suggests that the company maintained efficiency in managing its working capital during this period. However, the recent increase in the cash conversion cycle in 2023 may raise concerns about the company's liquidity management and operational efficiency.

Overall, while General Dynamics Corp. has experienced some variability in its cash conversion cycle in recent years, investors and analysts should continue to monitor this metric closely to assess the company's ability to efficiently manage its cash flows and working capital requirements.