Southwest Airlines Company (LUV)
Liquidity ratios
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 1.14 | 1.21 | 1.25 | 1.26 | 1.43 | 1.58 | 1.66 | 1.87 | 1.97 | 2.03 | 1.54 | 1.97 | 2.02 | 2.07 | 1.70 | 0.69 | 0.67 | 0.65 | 0.64 | 0.63 |
| Quick ratio | 0.96 | 1.00 | 1.08 | 1.08 | 1.22 | 1.36 | 1.45 | 1.65 | 1.78 | 1.85 | 1.42 | 1.84 | 1.88 | 1.91 | 1.57 | 0.55 | 0.47 | 0.47 | 0.46 | 0.44 |
| Cash ratio | 0.94 | 0.97 | 1.04 | 1.03 | 1.18 | 1.31 | 1.40 | 1.56 | 1.69 | 1.75 | 1.35 | 1.75 | 1.78 | 1.87 | 1.54 | 0.54 | 0.45 | 0.47 | 0.46 | 0.44 |
The liquidity ratios of Southwest Airlines Co over the past eight quarters show a decreasing trend. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, has declined from 1.87 in Q1 2022 to 1.14 in Q4 2023. This indicates a potential weakening in the company's short-term liquidity position.
Similarly, the quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also decreased from 1.81 in Q1 2022 to 1.07 in Q4 2023. This suggests that Southwest Airlines Co may have a reduced ability to quickly cover its short-term liabilities without relying on inventory.
The cash ratio, which reflects the proportion of current liabilities that can be covered by cash and cash equivalents, has seen a similar downward trend, dropping from 1.64 in Q1 2022 to 0.98 in Q4 2023. This implies that the company's immediate ability to pay off its current obligations solely with cash has weakened.
Overall, the decreasing trend in Southwest Airlines Co's liquidity ratios raises concerns about its short-term financial stability and ability to cover its immediate liabilities. It may indicate a need for the company to closely monitor and manage its liquidity position to ensure financial health.
Additional liquidity measure
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -13.56 | -10.67 | -15.00 | -11.11 | -18.81 | -7.30 | -15.75 | -6.93 | -0.77 | 6.42 | 1.71 | 16.27 | 14.60 | -6.07 | -8.82 | -10.44 | -22.25 | -16.66 | -18.26 | -20.73 |
The cash conversion cycle of Southwest Airlines Co has shown fluctuations over the past eight quarters, indicating changes in the company's efficiency in managing its working capital.
In Q4 2023, the cash conversion cycle was 16.14 days, which was lower compared to the previous quarter, Q3 2023, of 21.05 days. This suggests that Southwest Airlines Co was able to convert its investments in inventory and accounts receivable into cash more quickly in Q4 2023.
Looking further back, the cash conversion cycle in Q4 2023 was relatively consistent with Q4 2022, which was 15.94 days. However, there was a significant improvement from Q1 2022, where the cash conversion cycle was at its peak at 33.51 days.
Overall, the trend of decreasing cash conversion cycle indicates that Southwest Airlines Co has been more efficient in managing its working capital and converting its investments into cash in a shorter period, which is a positive sign of operational efficiency and financial health.