Goodyear Tire & Rubber Co (GT)

Goodyear Tire & Rubber Co.'s liquidity ratios, including the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet short-term obligations and manage its current liabilities effectively.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has fluctuated over the periods presented, ranging from 1.07 to 1.32. While a current ratio above 1 indicates that the company can cover its short-term obligations, a declining trend observed in the recent quarters could potentially signal challenges in managing current liabilities efficiently.

The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. Goodyear's quick ratio has similarly fluctuated over the periods reported, ranging from 0.55 to 0.70. A quick ratio below 1 indicates that the company may have difficulty meeting its short-term obligations without relying on inventory liquidation. The declining trend in the quick ratio suggests that the company may be relying more on inventory to meet its short-term commitments.

The cash ratio, which is the most stringent measure of liquidity, represents the company's ability to cover its current liabilities solely with cash and cash equivalents. Goodyear's cash ratio has shown relatively stable values across the periods presented, ranging from 0.17 to 0.21. A cash ratio below 1 implies that the company would not be able to settle all current liabilities immediately using only cash on hand.

Overall, while Goodyear Tire & Rubber Co. has been able to maintain liquidity levels above critical thresholds in most periods, the declining trend in the current and quick ratios warrants further monitoring to ensure the company's continued ability to meet its short-term obligations effectively.

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Additional liquidity measure

The cash conversion cycle of Goodyear Tire & Rubber Co. has shown fluctuating trends over the past eight quarters. The company's cash conversion cycle measures the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales.

In Q1 2022, the cash conversion cycle was 54.60 days, which increased to 55.36 days in Q2 2022. In Q3 2022, the cycle further increased to 62.76 days before decreasing to 40.79 days in Q4 2022.

Moving into 2023, the cycle increased to 58.97 days in Q1 2023, and then improved to 54.00 days in Q2 2023. However, there was a significant increase in the cash conversion cycle in Q3 2023 to 57.55 days, before declining to 35.83 days in Q4 2023.

This fluctuation in the cash conversion cycle indicates that Goodyear Tire & Rubber Co. has been managing its working capital and operations efficiency with varying degrees of success. A lower cash conversion cycle suggests that the company is efficiently managing its inventories, accounts receivables, and payables, resulting in quicker cash flows. Conversely, a higher cash conversion cycle may indicate inefficiencies in the company's operations.

Overall, Goodyear Tire & Rubber Co. should continue to monitor and manage its working capital effectively to ensure a consistent and optimal cash conversion cycle, which can positively impact the company's liquidity and profitability.