Hexcel Corporation (HXL)

Hexcel Corporation's liquidity ratios have shown some fluctuations over the years.

The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, decreased from 2.93 in 2020 to 2.21 in 2024. This downward trend may indicate a slight weakening in the company's short-term liquidity position, although the ratio remains above 1, indicating that Hexcel has more than enough current assets to cover its current liabilities.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also experienced a decline from 1.49 in 2020 to 0.95 in 2024. This suggests that Hexcel may have less liquid assets available to cover its short-term liabilities without relying on inventory.

The cash ratio, which is the most conservative liquidity measure as it only considers cash and cash equivalents, dropped from 0.80 in 2020 to 0.35 in 2024. This decline indicates a decreasing ability of Hexcel to meet its short-term obligations with its readily available cash resources.

Overall, while these ratios have fluctuated over the years, they generally indicate that Hexcel has maintained a strong liquidity position, with current assets comfortably covering current liabilities. However, the decreasing trend in the quick ratio and cash ratio suggests a potential need for the company to closely monitor its liquidity position and management of working capital in the future.

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Additional liquidity measure

The cash conversion cycle of Hexcel Corporation has shown a fluctuating trend over the past five years. Starting at 67.62 days on December 31, 2020, it gradually increased to 84.63 days by December 31, 2021. The trend continued upward, reaching 95.96 days by December 31, 2022. However, there was a slight decrease in the cash conversion cycle to 90.55 days on December 31, 2023, followed by a further reduction to 88.73 days by December 31, 2024.

A longer cash conversion cycle indicates that Hexcel Corporation is taking more time to convert its investments in inventory into cash receipts from sales. This could suggest inefficiencies in managing inventory levels, collecting receivables, or delaying payment to suppliers. It may also indicate potential liquidity challenges or operational inefficiencies within the company.

Overall, Hexcel Corporation should closely monitor its cash conversion cycle to ensure efficient management of working capital and optimize its cash flow operations to support sustainable growth and financial performance.