Knowles Cor (KN)

Liquidity ratios are crucial indicators of a company's ability to meet its short-term obligations. Looking at Knowles Corp's liquidity ratios over the past five years, we can observe certain trends and patterns.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has shown fluctuations over the years. In 2023, the current ratio stands at 2.61, indicating that Knowles Corp had $2.61 in current assets for every $1 in current liabilities. This suggests a strong liquidity position compared to previous years, showing an improvement from 2022 but slightly lower than 2019. Fluctuations in the current ratio can indicate changes in the company's asset composition and liquidity management.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. Knowles Corp's quick ratio has also varied over the years, with a value of 1.41 in 2023. This ratio indicates that the company has $1.41 in quick assets to cover each $1 of current liabilities. The quick ratio has generally been higher than the current ratio, reflecting a more conservative approach to liquidity management by excluding inventory from the calculation.

The cash ratio, which is the most conservative liquidity ratio, measures the company's ability to cover its current liabilities with cash and cash equivalents alone. Knowles Corp's cash ratio has ranged from 0.48 to 0.59 over the past five years, with a value of 0.59 in 2023. This suggests that the company had $0.59 in cash and cash equivalents for every $1 in current liabilities, indicating a strong ability to meet short-term obligations using liquid resources.

Overall, Knowles Corp's liquidity ratios demonstrate a generally healthy liquidity position, with improvements in the current and quick ratios in 2023 compared to the previous year. The company's ability to cover its short-term obligations has strengthened over time, as indicated by the increasing values of these ratios. However, ongoing monitoring of liquidity ratios is essential to ensure that the company maintains a strong financial position and can effectively manage its short-term obligations.

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Additional liquidity measure

The cash conversion cycle of Knowles Corp has shown varying trends over the past five years.

In 2019, the cash conversion cycle was 105.75 days, which indicates that it took the company approximately 105.75 days to convert its investments in inventory and other resources into cash inflows from sales.

In 2020, the cash conversion cycle increased slightly to 107.22 days, suggesting a slightly longer period for the company to convert its resources into cash.

However, in 2021, there was a significant increase in the cash conversion cycle to 106.28 days. This indicates a delay in converting resources into cash compared to the previous year.

The trend changed in 2022, with the cash conversion cycle further increasing to 166.79 days. This significant increase could suggest inefficiencies in managing inventory, collecting receivables, or paying suppliers promptly.

In 2023, the cash conversion cycle continued to rise to 191.40 days, showing a further delay in converting resources into cash. This trend could negatively impact the company's liquidity and working capital management.

Overall, the increasing trend in the cash conversion cycle over the past five years indicates potential challenges in efficiently managing the company's operating cycle and converting resources into cash inflows. Knowles Corp may need to focus on improving inventory management, enhancing receivables collection processes, and optimizing payment cycles to shorten the cash conversion cycle and improve its cash flow position.