Lincoln Electric Holdings Inc (LECO)

Based on the provided data, Lincoln Electric Holdings Inc's liquidity ratios indicate the company's ability to meet its short-term obligations.

- The current ratio declined from 2.02 in 2020 to 1.71 in 2021, before gradually improving to 1.87 in 2024. Although the ratio fluctuated, it generally remained above 1, indicating that the company had more current assets than current liabilities in most years, ensuring a basic level of short-term solvency.

- The quick ratio, a more stringent measure of liquidity, also followed a downward trend from 0.47 in 2020 to 0.26 in 2021, before recovering to 0.43 in 2024. This ratio takes into account only the most liquid assets, excluding inventory, which may indicate a higher risk of short-term solvency issues in the years of lower ratios.

- The cash ratio, which measures the ability to cover short-term liabilities with cash and cash equivalents, mirrored the trend seen in the quick ratio, declining from 0.47 in 2020 to 0.26 in 2021, before rebounding to 0.43 in 2024. This indicates that the company had a lower level of cash to cover its short-term obligations in 2021 but improved its cash position in subsequent years.

Overall, while the current ratio suggests a relatively stable liquidity position for Lincoln Electric Holdings Inc, the quick ratio and cash ratio show some volatility in the company's ability to quickly cover its short-term obligations with its most liquid assets. Investors and stakeholders should monitor these ratios to assess the company's ongoing liquidity position and ability to meet its short-term financial commitments.

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Additional liquidity measure

The cash conversion cycle of Lincoln Electric Holdings Inc has shown fluctuations over the past five years. The cycle increased from 78 days in December 2020 to 91 days in December 2021, indicating a lengthier period required to convert resources into cash.

In December 2022, the cycle extended further to 97.92 days, reaching its highest point during the period under review. However, the company managed to reduce the cycle to 75.70 days by December 2023, a significant improvement reflecting efficiency in cash management.

By December 2024, the cash conversion cycle slightly increased to 78.31 days, remaining relatively stable compared to the previous year. Overall, Lincoln Electric Holdings Inc should focus on maintaining a balanced cash conversion cycle to optimize working capital efficiency and ensure smooth operations.