Howmet Aerospace Inc (HWM)

The liquidity ratios of Howmet Aerospace Inc, including the current ratio, quick ratio, and cash ratio, show the company's ability to meet its short-term financial obligations.

The current ratio, which measures the company's ability to cover its current liabilities with its current assets, has been above 1 for all years, indicating a healthy liquidity position. However, there has been a slight downward trend from 2.21 in 2020 to 1.86 in 2023, which might suggest a decrease in the company's short-term liquidity over the years.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventories from current assets. Similar to the current ratio, the quick ratio has also seen a gradual decline from 1.32 in 2020 to 0.87 in 2023. This downward trend indicates that the company may have a reduced ability to meet its current liabilities using only its most liquid assets.

The cash ratio, which is the most conservative liquidity measure focusing solely on cash and cash equivalents to cover current liabilities, has fluctuated over the years. While the cash ratio was strong at 1.10 in 2020, it decreased to 0.48 in 2023, reflecting a potential strain on the company's ability to pay off its short-term obligations with readily available cash on hand.

Overall, the liquidity ratios of Howmet Aerospace Inc suggest a generally solid but declining liquidity position over the years, highlighting the importance for the company to closely monitor its liquidity management and ensure it has sufficient liquid assets to meet its short-term financial obligations.

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Additional liquidity measure

The cash conversion cycle of Howmet Aerospace Inc has shown variations over the past five years. In 2023, it increased to 97.92 days from 92.17 days in the previous year, indicating a slight deterioration in the company's efficiency in managing its cash conversion cycle. The company took longer to convert its investments in inventory and accounts receivable into cash during this period.

Comparing to 2021, where the cycle was at 98.84 days, the 2023 figure represents a marginal improvement. However, it is still higher than the cycle observed in 2019, which was significantly lower at 49.87 days, suggesting a longer turnaround time in converting the company's resources into cash.

Overall, the cash conversion cycle for Howmet Aerospace Inc has been somewhat volatile, with fluctuations observed throughout the years. It is crucial for the company to monitor and manage this cycle effectively to ensure optimal utilization of its resources and maintain healthy cash flow levels.