Lennox International Inc (LII)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.41 | 0.94 | 1.42 | 1.55 | 1.12 |
| Quick ratio | 0.65 | 0.42 | 0.66 | 0.82 | 0.52 |
| Cash ratio | 0.07 | 0.04 | 0.04 | 0.18 | 0.04 |
Lennox International Inc's liquidity ratios indicate the company's ability to meet its short-term obligations. The current ratio has fluctuated over the years, ranging from a low of 0.94 in 2022 to a high of 1.55 in 2020. In 2023, the current ratio improved to 1.41, which suggests that the company's current assets are 1.41 times greater than its current liabilities. A current ratio above 1 indicates that Lennox International Inc has sufficient current assets to cover its short-term obligations.
The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also improved in 2023 to 0.72. This indicates that Lennox International Inc may have difficulty meeting its short-term obligations without relying on inventory.
The cash ratio, which is the most conservative liquidity measure as it only considers cash and cash equivalents, improved significantly to 0.14 in 2023. This indicates that Lennox International Inc has a limited amount of highly liquid assets relative to its current liabilities.
Overall, while the current and cash ratios have shown improvement in 2023, the quick ratio remains below 1, indicating a potential liquidity challenge for Lennox International Inc if it needed to meet its short-term obligations without relying on inventory. Management should continue to monitor and manage its liquidity position to ensure the company's financial stability.
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 78.04 | 81.69 | 57.45 | 58.97 | 68.79 |
The cash conversion cycle of Lennox International Inc has fluctuated over the past five years. In 2023, the company's cash conversion cycle decreased to 78.04 days from 81.69 days in 2022, indicating an improvement in managing its working capital. However, compared to 2021 where the cycle was 57.45 days, the company took longer to convert its investments in inventory and receivables into cash in 2023.
Overall, the trend in the cash conversion cycle has been somewhat variable, with fluctuations observed from year to year. It is important for Lennox International Inc to closely monitor and manage its working capital to ensure efficient cash flow operations and maximize its financial performance.