L3Harris Technologies Inc (LHX)

L3Harris Technologies Inc's liquidity ratios show a trend of declining liquidity over the past five years. The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has decreased from 1.57 in 2020 to 1.01 in 2023. While a current ratio above 1 indicates that the company has enough current assets to cover its short-term obligations, a declining trend may signify potential liquidity challenges.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also shown a downward trend over the same period. The ratio has decreased from 1.52 in 2021 to 1.05 in 2023, indicating a potential decrease in the company's ability to quickly cover its short-term liabilities without relying on inventory sales.

Furthermore, the cash ratio, which represents the proportion of cash and cash equivalents to current liabilities, has also witnessed a decline from 0.30 in 2020 to 0.07 in 2023. A decreasing cash ratio may suggest that the company may be becoming less capable of meeting its short-term obligations using readily available cash resources.

Overall, the declining trend in L3Harris Technologies Inc's liquidity ratios, specifically the current ratio, quick ratio, and cash ratio, may raise concerns about the company's ability to efficiently manage its short-term financial obligations and maintain liquidity levels. Investors and stakeholders should monitor these ratios closely to assess the company's financial health and liquidity position.

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Additional liquidity measure

The cash conversion cycle of L3Harris Technologies Inc has shown an increasing trend over the past five years, indicating that it is taking longer for the company to convert its investments in inventory and receivables into cash.

In 2019, the cash conversion cycle was at its lowest point, standing at 12.25 days, which suggests that the company was efficiently managing its working capital and turning it into cash quickly. However, since then, the cash conversion cycle has been steadily increasing each year, reaching 139.79 days by the end of 2023.

This upward trend could imply potential inefficiencies in managing inventory levels, collecting receivables, or both. A longer cash conversion cycle means that the company is tying up more cash in its operations, potentially impacting its liquidity and overall financial health.

L3Harris Technologies Inc may need to review its inventory management practices, credit terms with customers, and overall working capital management strategies to streamline its cash conversion cycle and improve its cash flow position.