Honeywell International Inc (HON)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 2.44 | 1.27 | 1.25 | 1.30 | 1.47 |
| Quick ratio | 72.06 | 0.44 | 0.51 | 0.59 | 0.79 |
| Cash ratio | 72.06 | 0.44 | 0.51 | 0.59 | 0.79 |
The liquidity ratios of Honeywell International Inc have shown some fluctuations over the years.
- The current ratio, which measures the company's ability to pay off its short-term liabilities with its current assets, decreased from 1.47 in 2020 to 1.30 in 2021, and further dropped to 1.25 in 2022. However, it improved in 2023 to 1.27 and significantly increased to 2.44 in 2024. This indicates an improvement in the company's short-term liquidity position, especially in 2024.
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Honeywell's quick ratio decreased from 0.79 in 2020 to 0.59 in 2021, and further declined to 0.51 in 2022. The ratio significantly improved in 2024, reaching an unexpectedly high value of 72.06. This unexpected increase may be due to a significant increase in cash or highly liquid assets in 2024.
- The cash ratio, which is the most conservative liquidity measure, considers only cash and cash equivalents in relation to current liabilities. This ratio followed a similar trend to the quick ratio, decreasing from 0.79 in 2020 to 0.59 in 2021, and then dropped further to 0.51 in 2022. Like the quick ratio, the cash ratio increased significantly in 2024 to an unexpectedly high value of 72.06, reflecting a notable improvement in the company's cash position in that year.
Overall, while the current ratio shows a positive trend towards the end of the period, the unexpected spikes in the quick ratio and cash ratio in 2024 warrant further investigation to understand the underlying reasons behind these significant changes in liquidity ratios.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 3.02 | 98.06 | 84.84 | 80.16 | 73.91 |
Honeywell International Inc's cash conversion cycle has shown fluctuations over the years. The cycle increased from 73.91 days in December 2020 to 80.16 days in December 2021, indicating a longer period for the company to convert its investments in inventory into cash. This trend continued as the cycle further increased to 84.84 days in December 2022 and significantly spiked to 98.06 days in December 2023, showing potential inefficiencies in managing working capital.
However, there was a drastic improvement in December 2024, with the cash conversion cycle decreasing sharply to just 3.02 days. This significant reduction may be attributed to more effective inventory management, faster collection of receivables, or better payment terms with suppliers.
Overall, Honeywell International Inc's cash conversion cycle has experienced significant variations, highlighting the importance of closely monitoring working capital management to ensure optimal efficiency in converting investments into cash.