Harley-Davidson Inc (HOG)

The liquidity ratios of Harley-Davidson, Inc. indicate the company's ability to meet its short-term obligations with its current assets.

1. Current Ratio:

The current ratio shows a slight fluctuation over the past five years, ranging from 1.18 in 2020 to 1.39 in 2022. In 2023, the current ratio stands at 1.38, suggesting that for every dollar of current liabilities, the company has $1.38 of current assets available. This indicates relatively stable liquidity position, with assets generally sufficient to cover short-term liabilities. However, a downward trend from 2022 to 2023 warrants monitoring to ensure the company can maintain liquidity levels.

2. Quick Ratio:

The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. Throughout the five years, Harley-Davidson's quick ratio has remained low, ranging from 0.12 to 0.21. A quick ratio of 0.21 in 2023 indicates that the company has $0.21 of quick assets (such as cash and marketable securities) to cover each dollar of current liabilities. This implies a limited ability to cover short-term obligations without relying on inventory, signaling potential liquidity challenges.

3. Cash Ratio:

The cash ratio specifically focuses on the company's ability to pay off its current liabilities using only its cash and cash equivalents. Harley-Davidson's cash ratio has also shown variability, with a notable improvement from 0.08 in 2019 to 0.18 in 2021 and 2023. A cash ratio of 0.18 in 2023 suggests that the company has $0.18 in cash for every dollar of current liabilities, indicating a stronger cash position compared to the prior years.

In summary, while Harley-Davidson generally maintains adequate liquidity levels based on the current ratio, the low quick ratio across the years indicates a potential over-reliance on inventory for meeting short-term obligations. The improvement in the cash ratio signifies a bolstered cash position, which could help mitigate liquidity risks in case of unforeseen events. Monitoring these liquidity metrics is crucial to ensure the company can manage its short-term financial obligations effectively.

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Additional liquidity measure

The cash conversion cycle for Harley-Davidson, Inc. has shown a fluctuating trend over the past five years. In 2023, the cycle increased to 76.43 days from 74.93 days in 2022. This indicates that the company took slightly longer to convert its invested resources into cash during the most recent year.

Comparing 2023 to 2021, there was a significant increase in the cash conversion cycle from 50.20 days to 76.43 days. This suggests that Harley-Davidson may have faced challenges in efficiently managing its working capital during the year.

On the positive side, the company improved its cash conversion cycle in 2020 compared to the previous year, indicating more efficient management of cash, receivables, and inventory. However, the cycle then slightly increased in 2021 before jumping significantly in 2023.

Overall, Harley-Davidson's cash conversion cycle has experienced fluctuations, reflecting varying efficiencies in its working capital management over the past five years. The company may need to focus on streamlining its processes to improve cash flow and overall financial performance.