LKQ Corporation (LKQ)

LKQ Corporation's current ratio has shown a fluctuating trend over the past few years, ranging from a high of 2.29 in March 31, 2020, to a low of 1.47 in December 31, 2023. The company's current ratio as of December 31, 2024, stands at 1.71, indicating that for every dollar of current liabilities, they have $1.71 of current assets available to cover those obligations. While the current ratio has improved since the low point in 2023, it is still slightly below the levels seen in earlier years.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also experienced notable fluctuations. The quick ratio ranged from a low of 0.08 in December 31, 2024, to a high of 0.63 in June 30, 2023. As of December 31, 2024, the quick ratio is 0.08, indicating the company has $0.08 of highly liquid assets available to cover each dollar of current liabilities. This suggests a potential liquidity concern as the quick ratio is significantly below 1, which may indicate a reliance on inventory to meet short-term obligations.

The cash ratio, which is the most conservative liquidity ratio as it only considers cash and cash equivalents, shows a similar pattern of fluctuation. The cash ratio for LKQ Corporation ranges from 0.08 in December 31, 2024, to 0.63 in June 30, 2023. As of December 31, 2024, the cash ratio is 0.08, indicating that the company has $0.08 of cash and cash equivalents for every dollar of current liabilities. This suggests that the company may have limited cash reserves to meet its short-term obligations, potentially impacting its ability to weather financial challenges.

In summary, while LKQ Corporation's current ratio has improved from its low point in 2023, the quick and cash ratios suggest potential liquidity challenges. The company may need to closely monitor its liquidity position and consider strategies to improve its ability to meet short-term obligations.

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Additional liquidity measure

The cash conversion cycle of LKQ Corporation has shown some fluctuations over the periods from March 31, 2020, to December 31, 2024. This metric represents the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales.

The trend in the cash conversion cycle for LKQ Corporation during this period appears to be somewhat inconsistent, with fluctuations in the number of days it takes for the company to complete a cycle. Generally, a shorter cash conversion cycle is preferred as it indicates that the company is able to generate cash quickly from its operational activities.

LKQ Corporation's cash conversion cycle started at 131.44 days on March 31, 2020, decreased to a low point of 115.89 days on September 30, 2021, and then increased again to 137.40 days by December 31, 2023. The cycle improved slightly to 127.36 days on September 30, 2024.

A longer cash conversion cycle may indicate inefficiencies in managing inventory, collecting receivables, or paying creditors. It is important for the company to monitor and manage its cash conversion cycle effectively to ensure optimal cash flow management and operational efficiency.