Illinois Tool Works Inc (ITW)
Liquidity ratios
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 1.33 | 1.58 | 1.59 | 1.20 | 1.41 | 1.41 | 1.48 | 1.73 | 1.84 | 2.20 | 2.20 | 2.50 | 2.52 | 2.37 | 2.75 | 2.71 | 2.90 | 2.81 | 2.87 | 1.53 |
| Quick ratio | 0.90 | 1.04 | 1.02 | 0.78 | 0.87 | 0.87 | 0.93 | 1.15 | 1.26 | 1.57 | 1.64 | 1.92 | 1.96 | 1.84 | 1.94 | 1.90 | 2.06 | 1.95 | 1.97 | 1.13 |
| Cash ratio | 0.23 | 0.25 | 0.23 | 0.20 | 0.16 | 0.18 | 0.20 | 0.34 | 0.44 | 0.66 | 0.70 | 0.93 | 0.99 | 0.85 | 0.89 | 0.70 | 0.92 | 0.82 | 0.77 | 0.44 |
The liquidity ratios of Illinois Tool Works, Inc. provide insights into the company's ability to meet its short-term financial obligations.
The current ratio, which measures the company's ability to pay off its current liabilities with its current assets, shows some fluctuations over the quarters. The ratio ranged from 1.20 to 1.59 during the analyzed period, with an average of approximately 1.46. While a current ratio above 1 indicates that the company has more current assets than current liabilities, the decreasing trend from Q2 2023 to Q4 2023 may raise concerns about the company's short-term liquidity position.
The quick ratio, also known as the acid-test ratio, offers a more stringent measure of liquidity by excluding inventory from current assets. Illinois Tool Works, Inc.'s quick ratio ranged from 0.84 to 1.24, averaging around 1.03. This ratio indicates the company's ability to meet its short-term liabilities using its most liquid assets, excluding inventory. The downward trend observed from Q2 2023 to Q4 2023 may indicate weakening liquidity position.
The cash ratio, which is the most conservative liquidity measure as it considers only cash and cash equivalents in relation to current liabilities, ranged from 0.21 to 0.43, with an average of approximately 0.30. This ratio suggests how well the company can cover its current liabilities with its most liquid assets. The fluctuations in the cash ratio indicate variations in the company's cash position over the quarters.
Overall, the trends observed in Illinois Tool Works, Inc.'s liquidity ratios suggest some variability in the company's ability to cover its short-term obligations with its current assets and cash reserves. Monitoring these ratios over time can provide valuable insights into the company's financial health and liquidity management.
See also:
Additional liquidity measure
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 115.64 | 120.07 | 125.36 | 127.63 | 129.42 | 125.53 | 127.50 | 126.55 | 119.89 | 112.84 | 109.12 | 110.31 | 106.06 | 104.32 | 99.78 | 96.73 | 95.29 | 96.56 | 99.93 | 101.76 |
The cash conversion cycle of Illinois Tool Works, Inc. has shown fluctuations over the past eight quarters, ranging from 117.79 days to 131.50 days. The cycle measures the time it takes for the company to convert its resources, such as inventory and accounts receivable, into cash flow from sales. A lower number indicates a more efficient use of resources and quicker cash generation.
In the most recent quarter, Q4 2023, the cash conversion cycle decreased to 117.79 days compared to the previous quarter's 119.51 days. This reduction may be attributed to improvements in managing inventory levels and collecting accounts receivable, leading to a more efficient cash conversion process. However, it is worth noting that the cycle has not consistently shown a downward trend over the period analyzed, with fluctuations occurring from quarter to quarter.
Overall, Illinois Tool Works, Inc. should continue to monitor and optimize its cash conversion cycle to ensure efficient management of working capital and strive for a shorter cycle duration, which can positively impact the company's liquidity and profitability.