Knight Transportation Inc (KNX)

The liquidity ratios of Knight-Swift Transportation Holdings Inc, as depicted by the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet its short-term obligations using its current assets.

1. Current Ratio:
- The current ratio measures the company's ability to pay short-term obligations with its current assets.
- A higher current ratio is generally preferred as it indicates a stronger ability to meet short-term liabilities.
- Knight-Swift's current ratio has fluctuated over the years, with a notable decrease from 1.67 in 2022 to 0.94 in 2023.
- The current ratio in 2023 of 0.94 suggests that the company may have difficulty meeting its short-term obligations using its current assets alone, potentially indicating liquidity challenges.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets.
- A higher quick ratio indicates a better ability to meet short-term obligations without relying on selling inventory.
- Knight-Swift's quick ratio displays similar fluctuations to the current ratio, with a decrease from 1.41 in 2022 to 0.73 in 2023.
- The 2023 quick ratio of 0.73 further emphasizes potential liquidity concerns, as it suggests the company may struggle to meet short-term obligations without relying on selling inventory.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity measure, focusing solely on the company's ability to pay off short-term liabilities using cash and cash equivalents.
- A higher cash ratio signifies a stronger ability to cover short-term obligations with readily available cash.
- Knight-Swift's cash ratio has also decreased over the years, from 0.40 in 2022 to 0.20 in 2023.
- The 2023 cash ratio of 0.20 indicates that Knight-Swift relies more on other current assets besides cash to meet short-term obligations, which may present liquidity risks.

In summary, based on the liquidity ratios, Knight-Swift Transportation Holdings Inc's liquidity position has weakened in 2023 compared to previous years. The declining trend in the current, quick, and cash ratios raises concerns about the company's ability to meet short-term obligations using its current assets, highlighting potential liquidity challenges that investors and stakeholders should consider.

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Additional liquidity measure

The cash conversion cycle of Knight-Swift Transportation Holdings Inc has shown some fluctuations over the past five years. In 2023, the cash conversion cycle increased to 48.78 days compared to 44.28 days in 2022. This indicates that the company took longer to convert its investments in inventory and accounts receivable into cash during the year.

In 2021, the cash conversion cycle was 55.51 days, which was higher than the previous year but decreased in 2022. However, in 2020 and 2019, the company managed to decrease the cash conversion cycle to 45.40 days and 40.36 days, respectively.

Overall, the trend indicates some variability in Knight-Swift's ability to efficiently manage its working capital and convert its assets into cash. Monitoring the cash conversion cycle is crucial for the company's liquidity management and operational efficiency.