Kennametal Inc (KMT)

The liquidity ratios of Kennametal Inc over the past five years indicate a generally healthy liquidity position, with the current ratio consistently above 1. This suggests that the company has had sufficient current assets to cover its current liabilities.

The current ratio has shown a positive trend over the years, increasing from 1.60 in 2020 to 2.41 in 2024. This improvement indicates that Kennametal Inc has been able to enhance its ability to meet its short-term obligations using its current assets.

The quick ratio, which provides a more conservative measure of liquidity by excluding inventory from current assets, has also demonstrated a positive trend, with an increase from 0.94 in 2020 to 1.04 in 2024. This suggests that the company has been able to meet its immediate short-term liabilities more effectively.

The cash ratio, which is the most stringent measure of liquidity as it considers only cash and cash equivalents, has fluctuated over the years but has generally remained above 0.2. While the cash ratio decreased from 0.68 in 2020 to 0.31 in 2024, it is still at a reasonable level to cover immediate obligations with cash on hand.

Overall, the liquidity ratios of Kennametal Inc indicate a strong ability to meet its short-term obligations, with an improving trend in the current and quick ratios. However, management should continue to monitor and manage liquidity effectively to ensure the company remains financially healthy in the long term.

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Additional liquidity measure

The cash conversion cycle of Kennametal Inc has shown some fluctuations over the past five years. In the most recent fiscal year ending on June 30, 2024, the company's cash conversion cycle was 137.06 days, showing an improvement compared to the previous year. This indicates that, on average, it takes Kennametal Inc 137.06 days to convert its investments in raw materials and other inputs into cash from sales.

Overall, the trend over the five-year period has been relatively stable, with slight variations from year to year. A lower cash conversion cycle suggests that Kennametal Inc is managing its working capital more efficiently, which can be a positive signal for investors and creditors. By reducing the time it takes to convert inventory and accounts receivable into cash, the company can improve its liquidity and overall financial health.

It is important for Kennametal Inc to continue monitoring and managing its cash conversion cycle effectively to ensure optimal working capital management and sustainable operations. This would involve streamlining production processes, managing inventory levels, and ensuring prompt collection of accounts receivable to further improve the cash conversion cycle in the future.