Kennametal Inc (KMT)

The analysis of Kennametal Inc.'s liquidity ratios over the period from June 30, 2021, to June 30, 2025, indicates several trends and insights regarding the company's short-term financial health.

The current ratio, which measures the company's ability to meet its short-term obligations with its current assets, demonstrates a relatively stable but gradually improving trend. It decreased from 2.30 in 2021 to 2.11 in 2022, suggesting a slight weakening in liquidity. However, it subsequently increased to 2.37 in 2023, and continued to rise modestly to 2.41 in 2024 and 2.46 in 2025. This overall upward trend signifies an improving capacity to cover short-term liabilities with current assets, indicating a relatively conservative liquidity position maintained by the company.

In contrast, the quick ratio, which excludes inventory from current assets to provide a more stringent measure of liquidity, shows more variability. It declined from 1.04 in 2021 to 0.78 in 2022, suggesting a deterioration in the company's ability to meet short-term obligations without relying on inventory. Post-2022, the quick ratio generally recovered, rising to 0.95 in 2023, then achieving levels above 1.00 in 2024 (1.04) and maintaining a strong position at 1.03 in 2025. This pattern indicates that despite temporary setbacks, the company's ability to satisfy immediate liabilities improved over time.

The cash ratio, the most conservative liquidity measure, reveals a similar trend. It fell sharply from 0.35 in 2021 to 0.18 in 2022, reflecting a reduction in the company's cash reserves available to cover current liabilities solely through cash. Subsequently, there was a recovery observed in 2023, with the ratio reaching 0.24, followed by further improvement to 0.31 in 2024 and 0.33 in 2025. The increasing cash ratio over the latter years suggests an enhancement in the company's liquidity buffer in terms of readily available cash.

Overall, the liquidity profile of Kennametal Inc. during this period illustrates a period of temporary weakness in 2022, particularly in the quick and cash ratios. However, this was followed by a steady recovery and improvement in all three measures, with the current, quick, and cash ratios trending upward toward 2025. This pattern indicates a strengthening liquidity position, enhancing the company’s capability to meet short-term financial commitments and suggesting prudent management of liquid assets over the analyzed period.

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Additional liquidity measure

The cash conversion cycle (CCC) of Kennametal Inc demonstrates a relatively stable trend over the analyzed period from June 30, 2021, to June 30, 2025. Specifically, the CCC was 144.63 days in 2021, increasing slightly to 145.31 days in 2022, and then decreasing marginally to 144.30 days in 2023. A more noticeable reduction occurred by June 30, 2024, when the cycle shortened to 137.06 days, indicating an improvement in the company's operational efficiency in this period. However, this positive trend did not sustain, as the CCC increased again to 146.10 days by June 30, 2025, slightly surpassing the 2021 level.

Overall, the cyclical variation reflects minor fluctuations in inventory management, receivables collection, and payables turnover, with a temporary improvement around mid-2024. These changes suggest that Kennametal's operational cycle remains relatively consistent, with short-term adjustments possibly driven by external market conditions or internal process modifications. The significant decrease in 2024 may point to efforts to accelerate receivables or reduce inventory levels, whereas the subsequent increase indicates a return towards previous cycle durations.