Gates Industrial Corporation plc (GTES)

Gates Industrial Corporation plc has demonstrated consistent improvement in its liquidity ratios over the past five years. The current ratio, which indicates the company's ability to cover its short-term liabilities with its current assets, has shown a steady upward trend from 2.63 in December 2020 to 3.20 in December 2024. This trend suggests that Gates Industrial Corporation has been effective in managing its current assets and liabilities, ensuring a healthy liquidity position.

Similarly, the quick ratio, a more stringent measure of liquidity as it excludes inventory from current assets, has also improved over the same period, increasing from 1.71 in December 2020 to 1.99 in December 2024. This indicates that the company has a sufficient level of highly liquid assets to cover its short-term obligations without relying on inventory sales.

Furthermore, the cash ratio, which measures the proportion of cash and cash equivalents to current liabilities, has shown consistent growth from 0.72 in December 2020 to 0.95 in December 2024. This indicates that Gates Industrial Corporation has strengthened its ability to meet its immediate liabilities with cash on hand, providing a more secure liquidity position.

Overall, the improving trend in all three liquidity ratios suggests that Gates Industrial Corporation plc has been effectively managing its liquidity and maintaining a strong financial position over the years.

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Additional liquidity measure

The cash conversion cycle of Gates Industrial Corporation plc has shown some fluctuations over the five-year period from December 31, 2020, to December 31, 2024.

At the end of 2020, the company had a cash conversion cycle of 113.41 days, which decreased to 106.48 days by the end of 2021, indicating an improvement in efficiency in converting its resources into cash. However, by the end of 2022, the cash conversion cycle slightly increased to 113.94 days.

In 2023, there was a slight decrease to 112.92 days, showing a temporary improvement in the cycle. However, by the end of 2024, the cash conversion cycle increased significantly to 128.15 days, which could imply delays in converting inventory into sales and ultimately into cash.

Overall, the trend in Gates Industrial Corporation plc's cash conversion cycle seems to fluctuate, with some periods of improvement and others showing potential challenges in managing its working capital effectively. It may be important for the company to focus on optimizing its operational efficiency to reduce the cycle duration and enhance liquidity management.