Hertz Global Holdings Inc (HTZ)

Hertz Global Holdings Inc.'s liquidity ratios, which include the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet its short-term obligations with available assets.

The current ratio has been declining over the past three years, indicating a decrease in the company's ability to cover its short-term liabilities with its current assets. The ratio stood at 1.43 in 2023, down from 1.60 in 2022 and significantly lower than the 2.15 reported in 2021. This trend suggests that Hertz may be experiencing liquidity challenges or facing difficulties in managing its current liabilities efficiently.

Similarly, the quick ratio has also shown a decreasing trend over the same period, signaling a reduction in the company's ability to meet its immediate financial obligations without relying on inventory. The quick ratio was 1.22 in 2023, down from 1.39 in 2022 and notably lower than the 1.96 recorded in 2021. This could imply potential difficulties in converting current assets into cash quickly to settle short-term debts.

Furthermore, the cash ratio has been consistently decreasing, indicating a dwindling ability to cover immediate liabilities solely with cash and cash equivalents. In 2023, the cash ratio was reported at 0.68, a significant drop from 0.95 in 2022 and much lower than the 1.59 recorded in 2021. This downward trend suggests a potential strain on the company's cash resources and raises concerns about its ability to meet urgent payment obligations.

Overall, the declining trend in Hertz Global Holdings Inc.'s liquidity ratios, namely the current ratio, quick ratio, and cash ratio, highlights potential liquidity challenges and may indicate a need for the company to focus on improving its short-term liquidity position to ensure financial stability and meet upcoming obligations effectively.

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Additional liquidity measure

The cash conversion cycle of Hertz Global Holdings Inc. has been increasing over the past three years. In 2021, the company had a cash conversion cycle of 37.71 days, which increased to 40.93 days in 2022 and further increased to 46.39 days in 2023.

This trend indicates that the company is taking longer to convert its investments in inventory into cash. A longer cash conversion cycle may suggest inefficiencies in managing inventory, collecting receivables, or paying suppliers.

Hertz Global Holdings Inc. should closely monitor its cash conversion cycle and identify areas where improvements can be made to shorten the cycle and enhance cash flow efficiency. This could involve optimizing inventory levels, improving accounts receivable collection processes, and negotiating favorable payment terms with suppliers.