Goodyear Tire & Rubber Co (GT)

Goodyear Tire & Rubber Co's liquidity ratios indicate the company's ability to meet its short-term obligations. The current ratio, which compares current assets to current liabilities, has shown a slight improvement over the years, from 1.10 in 2020 to 1.04 in 2024. Despite some fluctuations, the current ratio remains above 1, suggesting that the company has an adequate level of current assets to cover its current liabilities.

On the other hand, the quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity, excluding inventories from current assets. The trend in Goodyear Tire & Rubber Co's quick ratio has been decreasing, from 0.30 in 2020 to 0.11 in 2024. This may indicate a decreasing ability to meet short-term obligations without relying on inventory.

Lastly, the cash ratio, which measures the company's ability to cover its current liabilities with its cash and cash equivalents, has followed a similar trend to the quick ratio, declining from 0.30 in 2020 to 0.11 in 2024. This suggests a decreasing ability to meet short-term obligations solely with cash on hand.

Overall, while the current ratio shows a relatively stable liquidity position for Goodyear Tire & Rubber Co, the decreasing trends in the quick ratio and cash ratio indicate a potential deterioration in the company's ability to meet short-term obligations without relying on inventory or cash reserves. Management may need to monitor this trend closely to ensure the company's liquidity position remains sound.

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Additional liquidity measure

The cash conversion cycle of Goodyear Tire & Rubber Co has shown fluctuations over the years. As of December 31, 2020, the company's cash conversion cycle was at 76.02 days, indicating the number of days it takes Goodyear to convert its investments in inventory and accounts receivable into cash generated from sales.

Subsequently, the cash conversion cycle increased to 95.81 days by December 31, 2021, and further to 98.41 days by December 31, 2022, suggesting a delay in the conversion of inventory and receivables into cash during these periods.

By December 31, 2023, the cash conversion cycle decreased to 81.52 days, indicating an improvement in the company's efficiency in managing its working capital. However, by December 31, 2024, it slightly increased to 86.51 days.

Overall, the trend in Goodyear's cash conversion cycle shows variability, with fluctuations indicating changes in the company's ability to efficiently manage its cash flow and working capital over the years. This metric is crucial as it reflects the efficiency and effectiveness of the company's operations and financial management in converting resources into cash and should be monitored closely for any potential impact on the company's financial health and performance.