LKQ Corporation (LKQ)

Based on the provided data, the liquidity ratios of LKQ Corporation have shown mixed trends over the past five years.

1. Current Ratio: The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has gradually decreased from 2.03 in 2020 to 1.71 in 2024. While the ratio remains above 1, indicating that LKQ Corporation can meet its short-term liabilities, the downward trend suggests a relatively weaker liquidity position in recent years.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. LKQ Corporation has experienced a significant decline in its quick ratio from 0.24 in 2020 to 0.08 in 2024. This decreasing trend indicates a potential challenge in meeting short-term obligations without relying on inventory for liquidity.

3. Cash Ratio: The cash ratio, reflecting the company's ability to pay off its current liabilities with its cash and cash equivalents, has also shown a consistent decline from 0.24 in 2020 to 0.08 in 2024. This downward trajectory suggests a reduced capacity to settle immediate obligations solely based on available cash reserves.

Overall, the liquidity analysis of LKQ Corporation reveals a concerning trend of diminishing liquidity ratios over the years, indicating a potential need for the company to improve its cash management and short-term asset liquidity to enhance its financial flexibility and stability.

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Additional liquidity measure

LKQ Corporation's cash conversion cycle has shown fluctuation over the past five years.

- On December 31, 2020, the cash conversion cycle was 125.27 days, indicating that it took the company about 125 days to convert its investments in inventory and receivables into cash.
- By December 31, 2021, the cycle decreased slightly to 122.69 days, suggesting that the company was able to manage its working capital more efficiently.
- However, in the following years, the cash conversion cycle increased to 132.67 days on December 31, 2022, 137.40 days on December 31, 2023, and then decreased to 134.41 days on December 31, 2024.

This fluctuation in the cash conversion cycle may indicate changes in the company's inventory management, accounts receivable collection, and accounts payable processes. It is important for LKQ Corporation to monitor and improve its cash conversion cycle to ensure efficient utilization of its working capital and overall financial health.