Mohawk Industries Inc (MHK)

Liquidity ratios

Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Current ratio 1.62 1.78 1.92 1.78 2.26
Quick ratio 0.25 0.20 0.22 0.20 0.57
Cash ratio 0.25 0.20 0.22 0.20 0.57

Based on the provided data, we can analyze the liquidity ratios of Mohawk Industries Inc over the period from December 31, 2020, to December 31, 2024.

1. Current Ratio:
- The current ratio measures the company's ability to meet short-term obligations with its current assets. A ratio above 1 indicates the company has more current assets than current liabilities.
- Mohawk Industries Inc's current ratio decreased from 2.26 in December 31, 2020, to 1.62 in December 31, 2024.
- The decreasing trend in the current ratio suggests a potential weakening in the company's short-term liquidity position over the analyzed period.

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.
- Mohawk Industries Inc's quick ratio declined from 0.57 in December 31, 2020, to 0.25 in December 31, 2024.
- This decreasing trend indicates a reduction in the company's ability to quickly cover its current liabilities with its most liquid assets.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity measure, considering only cash and cash equivalents to cover current liabilities.
- Mohawk Industries Inc's cash ratio also decreased from 0.57 in December 31, 2020, to 0.25 in December 31, 2024.
- The downward trend in the cash ratio further highlights the potential challenges in the company's ability to settle immediate obligations with its readily available cash reserves.

In summary, the liquidity ratios of Mohawk Industries Inc experienced a decline over the analyzed period, indicating a potential deterioration in the company's short-term liquidity position. Investors and stakeholders should closely monitor these ratios to assess the company's ability to meet its upcoming financial obligations.


Additional liquidity measure

Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Cash conversion cycle days 112.58 110.55 115.96 110.06 98.05

The cash conversion cycle for Mohawk Industries Inc has shown a gradual increase over the past five years. Starting at 98.05 days on December 31, 2020, it has steadily risen to 112.58 days by December 31, 2024. This indicates that the company is taking longer to convert its investments in inventory into cash receipts from sales and then to pay its suppliers.

A longer cash conversion cycle can potentially strain the company's liquidity and cash flow management, as it implies that capital is tied up in the production and sales process for a longer period before being realized. Management should monitor this trend closely and take actions to optimize inventory management, collections from customers, and payment to suppliers in order to improve working capital efficiency and overall financial health.