L3Harris Technologies Inc (LHX)

L3Harris Technologies Inc's liquidity ratios indicate its ability to meet short-term obligations and financial flexibility.

1. Current Ratio: The company's current ratio has been declining over the years, from 1.57 in 2020 to 1.08 in 2024. While a current ratio above 1 indicates the company's ability to cover its current liabilities with current assets, the decreasing trend may suggest a potential challenge in meeting short-term obligations in the future.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, measures the company's ability to meet short-term obligations using only its most liquid assets. L3Harris' quick ratio decreased from 0.30 in 2020 to 0.08 in 2024, reflecting a significant decline in its ability to cover its short-term liabilities without relying on inventory.

3. Cash Ratio: The cash ratio provides insight into the company's ability to cover its short-term liabilities with its most liquid asset, cash. L3Harris' cash ratio remained relatively stable over the years, ranging from 0.07 to 0.21, indicating that the company has a sufficient level of cash to meet its immediate obligations.

In conclusion, while L3Harris Technologies Inc has maintained a moderate level of liquidity, the declining trends in the current and quick ratios raise concerns about its short-term financial health and ability to meet upcoming obligations efficiently. Investors and stakeholders should continue to monitor these ratios to assess the company's liquidity position accurately.

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Additional liquidity measure

The cash conversion cycle of L3Harris Technologies Inc, a measure of how efficiently the company manages its working capital, has shown fluctuations over the years. From December 31, 2020, to December 31, 2024, the cash conversion cycle has ranged from a low of 27.56 days to a high of 38.83 days.

In 2020 and 2021, the company's cash conversion cycle remained relatively stable, indicating efficient management of its cash, inventory, and receivables. However, there was a noticeable increase in the cash conversion cycle in 2022 and 2023, suggesting potential challenges in converting sales into cash or managing inventory and receivables effectively during those periods.

The decrease in the cash conversion cycle in 2024 compared to 2023 may indicate improvements in managing working capital and liquidity. Overall, monitoring the cash conversion cycle is crucial for evaluating L3Harris Technologies Inc's operational efficiency and financial performance over time.