ManpowerGroup Inc (MAN)

The liquidity ratios of ManpowerGroup, namely the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet its short-term financial obligations.

1. Current Ratio: This ratio measures the company's ability to pay off its current liabilities with its current assets. A current ratio above 1 indicates that the company has more current assets than current liabilities. ManpowerGroup's current ratio has shown a slight decline over the years, suggesting that its ability to cover short-term obligations with current assets has weakened. The current ratio ranged from 1.11 in 2021 to 1.46 in 2019.

2. Quick Ratio: Also known as the acid-test ratio, the quick ratio is a more stringent measure of liquidity as it excludes inventory from current assets. A quick ratio above 1 indicates that the company can cover its short-term liabilities without relying on selling inventory. ManpowerGroup's quick ratio follows a similar trend to the current ratio, ranging from 1.11 in 2021 to 1.46 in 2019, reflecting a decline in the company's ability to meet short-term obligations without inventory.

3. Cash Ratio: The cash ratio is the most conservative liquidity measure, focusing solely on the company's ability to cover current liabilities with cash and cash equivalents. A cash ratio above 1 indicates that the company holds enough cash to settle short-term obligations. ManpowerGroup's cash ratio has also decreased over the years, with values ranging from 0.15 in 2023 to 0.27 in 2019. This downward trend implies that the company may have less readily available cash to meet immediate payment demands.

In summary, ManpowerGroup's liquidity ratios have shown a weakening trend, as indicated by decreasing current, quick, and cash ratios over the years. This suggests that the company may face challenges in meeting its short-term financial obligations with its current asset base. It is essential for stakeholders to monitor these ratios closely to assess the company's liquidity position and risk of financial distress.

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Additional liquidity measure

The cash conversion cycle for ManpowerGroup has shown a trend of improvement over the past five years. In 2023, the company's cash conversion cycle decreased to 29.32 days from 31.00 days in 2022, indicating that the company took fewer days to convert its investments in inventory and other resources into cash from sales. This reflects improved efficiency in managing its working capital.

Compared to the numbers from 2020 and 2019, where the cash conversion cycle was 38.82 days and 40.60 days respectively, the company has significantly enhanced its working capital management processes. This suggests that ManpowerGroup has been more effective in optimizing its operational and financial activities to generate cash flows at a quicker pace.

Overall, the decreasing trend in the cash conversion cycle is a positive indicator of the company's ability to efficiently manage its working capital and convert its assets into cash. Continued focus on maintaining this trend may lead to further improvements in cash flow and liquidity for ManpowerGroup in the future.