Johnson Controls International PLC (JCI)

Based on the provided data, we can observe a declining trend in Johnson Controls International plc's liquidity ratios over the past five years.

The current ratio, which measures the company's ability to meet its short-term obligations using its current assets, has decreased from 1.37 in 2019 to 0.97 in 2023. This suggests a weakening ability to cover current liabilities with current assets over the period.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also displays a declining trend from 1.16 in 2019 to 0.72 in 2023. This indicates a diminishing ability to meet short-term obligations without relying on the sale of inventory.

Furthermore, the cash ratio, which indicates the proportion of current liabilities that can be covered by cash and cash equivalents, has exhibited a downward trajectory from 0.52 in 2019 to 0.18 in 2023. This suggests a decreasing capacity to settle short-term obligations using cash and cash equivalents alone.

Overall, the decreasing trend in all three liquidity ratios signifies a potential concern for Johnson Controls International plc's ability to meet its short-term financial obligations and suggests a need for closer scrutiny of its liquidity management and working capital practices.

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See also:

Johnson Controls International PLC Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle (CCC) is an important financial metric that measures the time it takes for a company to convert its investments in inventory and other resources into cash flow from sales. A lower CCC indicates a more efficient use of working capital and a quicker turnover of resources into cash.

Based on the data provided, Johnson Controls International plc's cash conversion cycle has fluctuated over the past five years. In 2023, the CCC increased to 51.26 days from 42.49 days in 2022. This indicates that it took the company longer to convert its investments in inventory and other resources into cash flow from sales in 2023 compared to 2022. This increase may be a cause for concern as it could indicate a less efficient use of working capital or challenges in managing inventory levels or collection of receivables.

When we compare the CCC to previous years, we can see that it was higher in 2023 than in 2021 and 2019, indicating a trend of slower conversion of resources into cash flow. However, the CCC was lower in 2023 compared to 2020, suggesting some improvement in the conversion cycle from the previous year.

Overall, the trend in Johnson Controls International plc's cash conversion cycle over the past five years exhibits some variability. It is essential for the company's management to closely monitor the factors that contribute to the CCC, such as inventory management, accounts receivable collection, and accounts payable turnover, in order to optimize working capital efficiency and enhance cash flow generation.