Graphic Packaging Holding Company (GPK)

Based on the liquidity ratios of Graphic Packaging Holding Company, we can observe the following trends over the past few years:

1. Current Ratio: The current ratio measures the company's ability to cover its short-term liabilities with its short-term assets. Graphic Packaging Holding Company's current ratio has shown fluctuations over the years, ranging from 1.09 in 2020 to 1.46 in 2024. A current ratio above 1 indicates that the company has more current assets than current liabilities, which is generally considered healthy for a company.

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. Graphic Packaging Holding Company's quick ratio has ranged from 0.39 to 0.53 over the observed period. A quick ratio above 1 is preferred as it indicates the company can meet its short-term obligations without relying on selling inventory.

3. Cash Ratio: The cash ratio focuses solely on the most liquid assets, cash and cash equivalents, relative to current liabilities. Graphic Packaging Holding Company's cash ratio has been relatively low, ranging from 0.06 to 0.10. A higher cash ratio is generally better as it shows the company has a higher proportion of easily accessible funds to cover immediate obligations.

In summary, while Graphic Packaging Holding Company's liquidity ratios have shown some variability over the years, maintaining current and quick ratios above 1 indicates the company's ability to meet its short-term obligations. However, the company may want to focus on increasing its cash reserves to improve its ability to cover immediate liabilities with highly liquid assets.

---

Additional liquidity measure

The cash conversion cycle (CCC) of Graphic Packaging Holding Company has shown fluctuations over the past five years. As of December 31, 2020, the CCC was 56.64 days, increasing slightly to 57.94 days by December 31, 2021. However, there was a decrease in the CCC to 54.64 days by December 31, 2022. Subsequently, the CCC increased significantly to 61.51 days by December 31, 2023, and further to 61.68 days by December 31, 2024.

Overall, the trend in the CCC indicates some variability in the efficiency of Graphic Packaging Holding Company's working capital management. A lower CCC suggests that the company is able to convert its inventory and receivables into cash more quickly, which is favorable. On the other hand, a higher CCC indicates a longer period to convert resources into cash, potentially signaling inefficiencies in operations.

It is crucial for the company to closely monitor and manage its cash conversion cycle to ensure optimal utilization of resources and maintain healthy liquidity levels. By analyzing the CCC trends, Graphic Packaging Holding Company can identify areas for improvement in its working capital management processes to enhance overall operational efficiency and financial performance.