ITT Inc (ITT)

ITT Inc's liquidity ratios have shown a declining trend over the past five years, indicating potential challenges in meeting short-term obligations.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, decreased from 2.20 in 2020 to 1.40 in 2024. While the ratio remains above 1, suggesting the company still has more than enough current assets to cover its current liabilities, the decreasing trend may indicate a weakening liquidity position.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also decreased from 1.57 in 2020 to 0.86 in 2024. This indicates a declining ability to meet short-term obligations without relying on inventory, which could suggest potential issues with cash flow management.

Furthermore, the cash ratio, which measures the company's ability to cover its current liabilities with its cash and cash equivalents, declined significantly from 0.99 in 2020 to 0.33 in 2024. This decreasing trend indicates a reduction in the company's ability to settle short-term obligations purely with cash on hand, possibly signaling a need to improve cash management practices.

In conclusion, the declining trend in ITT Inc's liquidity ratios over the past five years suggests a potential deterioration in the company's ability to meet its short-term financial obligations. Monitoring and addressing these liquidity challenges will be crucial for maintaining financial stability and operational flexibility.

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Additional liquidity measure

ITT Inc's cash conversion cycle has experienced some fluctuation over the past five years. The cycle measures the time it takes for the company to convert its investments in inventory into cash from sales to customers.

As of December 31, 2020, the cash conversion cycle was 86.32 days, which decreased slightly to 84.53 days by December 31, 2021. However, there was an increase in the cycle duration in the following years, with figures reaching 100.29 days on December 31, 2022, and 98.29 days on December 31, 2023.

By December 31, 2024, the cash conversion cycle improved to 91.01 days, showing a reduction from the previous year. Generally, a shorter cash conversion cycle indicates that the company is efficiently managing its working capital and turning its inventory into cash more quickly.

ITT Inc should continue monitoring its cash conversion cycle to ensure that it remains at optimal levels to support its operations and financial performance.