GXO Logistics Inc (GXO)

The current ratio measures GXO Logistics Inc's ability to meet short-term obligations with its current assets. A current ratio below 1 indicates the company may have difficulty covering its short-term liabilities. Over the last four years, GXO's current ratio has shown a fluctuating trend, ranging from 0.90 to 0.98. This suggests that the company's short-term liquidity position has been somewhat unstable.

The quick ratio, also known as the acid-test ratio, excludes inventory from current assets to provide a more stringent liquidity assessment. Like the current ratio, GXO's quick ratio has also ranged from 0.90 to 0.98 over the past four years. This indicates that GXO's ability to cover immediate liabilities using its most liquid assets has been consistently narrow.

The cash ratio focuses solely on the company's cash and cash equivalents relative to current liabilities. GXO's cash ratio has remained at 0.25 in both 2020 and 2021 before increasing to 0.31 in the last two years. While this shows a slight improvement, the cash ratio suggests that GXO may have limited cash reserves to cover its short-term obligations.

Overall, GXO Logistics Inc's liquidity ratios paint a picture of a company with a relatively tight liquidity position, as indicated by consistently low current, quick, and cash ratios. Management should assess ways to improve the company's liquidity position to ensure it can meet its short-term financial obligations efficiently.

---

Additional liquidity measure

The cash conversion cycle of GXO Logistics Inc has shown a consistent improvement over the past four years, decreasing from 75.55 days in 2020 to 65.44 days in 2023. This indicates that the company has been more efficient in managing its working capital and converting its investments in inventory and accounts receivable into cash.

A lower cash conversion cycle suggests that GXO Logistics Inc is able to collect payments from customers and manage its inventory more quickly, leading to a faster conversion of sales into cash. This can improve the company's liquidity position and overall financial health.

The decreasing trend in the cash conversion cycle is a positive sign of operational efficiency and effective cash flow management within the company. It may also indicate better control over inventory levels and accounts receivable, leading to improved working capital management.

Overall, the decreasing cash conversion cycle of GXO Logistics Inc reflects favorable financial performance and effective working capital management practices over the analyzed period.