LyondellBasell Industries NV (LYB)

Based on the provided data, we can analyze the liquidity ratios of LyondellBasell Industries NV over the years:

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term obligations with its current assets.
- LyondellBasell's current ratio decreased from 2.11 in 2020 to 1.69 in 2021 but showed some improvement in subsequent years.
- A ratio above 1 indicates that the company has more current assets than current liabilities, which is generally considered favorable for meeting short-term obligations.
- Despite the fluctuations, the current ratio for LyondellBasell remained above 1 in all years, suggesting a relatively healthy liquidity position.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets.
- LyondellBasell's quick ratio fluctuated over the years, ranging from 0.20 in 2021 to 0.50 in 2024.
- A quick ratio below 1 indicates that the company may have difficulty meeting its short-term obligations without relying on the sale of inventory.
- While the quick ratio for LyondellBasell showed improvement in 2024, it remained relatively low in 2021 and 2022, warranting attention to liquidity management.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity measure, representing the proportion of current liabilities covered by cash and cash equivalents.
- LyondellBasell's cash ratio mirrored the trend of the quick ratio, ranging from 0.20 in 2021 to 0.50 in 2024.
- A higher cash ratio indicates a stronger ability to settle short-term obligations with cash on hand, which is crucial for financial stability.
- The increase in the cash ratio over the years suggests an improved ability to meet immediate payment needs, aligning with the positive trend in liquidity observed in the company.

In summary, while LyondellBasell Industries NV showed fluctuations in its liquidity ratios over the years, the overall trend indicates a relatively stable liquidity position with improvements in certain ratios such as the current ratio and cash ratio. Management should continue to monitor and manage liquidity effectively to ensure the company's ability to meet its short-term obligations.

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See also:

LyondellBasell Industries NV Liquidity Ratios

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Additional liquidity measure

Over the past five years, LyondellBasell Industries NV has shown a decreasing trend in its cash conversion cycle, a key metric that measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

From 65.09 days in 2020, the cash conversion cycle decreased to 47.83 days in 2021, demonstrating an improvement in the company's efficiency in managing its working capital. This trend continued as the cycle further decreased to 39.99 days in 2022, indicating that the company was able to streamline its operations and convert its assets into cash more quickly.

However, there was a slight uptick in the cash conversion cycle in 2023 to 48.52 days, which might indicate a temporary delay in the conversion of assets into cash. Nonetheless, this increase was followed by a decrease to 47.57 days in 2024, showing a rebound in efficiency in managing working capital.

Overall, the decreasing trend in LyondellBasell Industries NV's cash conversion cycle over the five-year period implies that the company has been effectively managing its working capital, improving its liquidity, and potentially enhancing its overall financial performance.