Harley-Davidson Inc (HOG)

Harley-Davidson Inc's liquidity ratios show mixed trends over the past five years.

1. Current Ratio: The current ratio measures the company's ability to cover its short-term liabilities with its short-term assets. The current ratio has decreased from 1.47 in 2020 to 1.40 in 2024. While a current ratio above 1 indicates that the company can meet its short-term obligations, a declining trend should be monitored, as it may indicate potential liquidity challenges in the future.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Harley-Davidson's quick ratio has declined significantly from 0.82 in 2020 to 0.45 in 2024. This decreasing trend raises concerns about the company's ability to meet its short-term obligations without relying on inventory liquidation.

3. Cash Ratio: The cash ratio measures a company's ability to cover its current liabilities with cash and cash equivalents alone. Harley-Davidson's cash ratio has remained stable at 0.45 from 2022 to 2024. While a cash ratio of less than 1 is common for most companies, it is essential to monitor any further decrease as it may indicate a potential liquidity strain.

In summary, despite Harley-Davidson Inc maintaining current ratios above the safe threshold of 1, the declining trend raises concerns about its liquidity position. The significant decrease in the quick ratio indicates potential challenges in meeting short-term obligations without relying on inventory. Monitoring the liquidity ratios closely and implementing effective liquidity management strategies may be crucial for the company's financial health.

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Additional liquidity measure

The cash conversion cycle of Harley-Davidson Inc has shown fluctuations over the years based on the provided data. In 2020, the company's cash conversion cycle was 63.06 days, indicating that it takes approximately 63 days for the company to convert its investments in inventories and receivables into cash.

However, the cash conversion cycle increased to 71.79 days in 2021. This suggests that the company took longer to convert its investments into cash during that period. In 2022, there was a significant increase in the cash conversion cycle to 101.98 days, indicating a prolonged period required to convert investments into cash.

In 2023, the cash conversion cycle decreased to 83.82 days, showing some improvement compared to the previous year. In 2024, there was a further decrease to 80.59 days, indicating a continued trend towards a more efficient cash conversion cycle compared to 2022.

Overall, the analysis of Harley-Davidson Inc's cash conversion cycle indicates fluctuations in the efficiency of converting investments into cash over the years, with improvements seen in some periods and challenges in others. Monitoring and managing the cash conversion cycle is crucial for the company to optimize its working capital and overall financial performance.