Mohawk Industries Inc (MHK)

Mohawk Industries, Inc.'s liquidity ratios provide insights into the company's ability to meet short-term obligations and manage its current assets effectively.

1. Current Ratio:
The current ratio measures the company's ability to cover its short-term liabilities with its current assets. Mohawk Industries, Inc.'s current ratio has been relatively stable over the past eight quarters, ranging from 1.44 to 1.92. Generally, a current ratio above 1 indicates the company has more current assets than current liabilities. Mohawk's current ratio indicates that it has had a healthy liquidity position, with a notable peak in Q4 2022. However, the slight decline in more recent quarters may warrant further monitoring to ensure the company maintains a comfortable level of liquidity.

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 has shown similar stability, ranging from 0.76 to 1.01 over the past eight quarters. A quick ratio above 1 suggests the company can cover its short-term obligations without relying on selling inventory. While Mohawk's quick ratio has been relatively healthy, it dipped below 1 in a few quarters, signaling a potential need to improve liquidity by reducing reliance on inventory in the short term.

3. Cash Ratio:
The cash ratio specifically assesses the company's ability to cover its current liabilities with cash and cash equivalents. Mohawk Industries, Inc.'s cash ratio has also remained consistent, fluctuating between 0.24 and 0.39. A cash ratio above 0.20 or 20% is generally considered acceptable. Mohawk's cash ratio indicates a moderate level of liquidity, with the company possessing a reasonable amount of cash to cover a portion of its short-term obligations. However, the trend towards higher values for the cash ratio in more recent quarters suggests an improvement in the company's cash position, which may enhance its ability to meet immediate financial needs.

In conclusion, Mohawk Industries, Inc. has maintained relatively stable liquidity ratios over the past eight quarters, with the current ratio consistently above 1, indicating solid liquidity levels. While the quick ratio and cash ratio have shown variations, they also reflect a reasonably healthy liquidity position. The company's ability to manage its short-term obligations appears robust based on these liquidity ratios, although ongoing monitoring is advisable to ensure continued financial stability.

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Additional liquidity measure

The cash conversion cycle of Mohawk Industries, Inc. has shown some fluctuations over the past eight quarters. The company's cash conversion cycle measures the time it takes for Mohawk to convert its investments in inventory and other resources into cash flows from sales.

From Q1 2022 to Q3 2023, the cash conversion cycle ranged from a low of 118.36 days to a high of 132.13 days. It appears that the company had the shortest cash conversion cycle in Q1 2022, indicating a more efficient management of its inventory and cash flow. However, the cycle increased in the following quarters, peaking in Q4 2022.

In recent quarters, the cash conversion cycle has been generally improving, with decreases from Q4 2022 to Q3 2023. This suggests that Mohawk has been able to manage its working capital more efficiently, potentially by reducing inventory levels or improving its accounts receivable collection process.

Overall, while the cash conversion cycle has shown variability, the recent trend of improvement indicates that Mohawk Industries, Inc. may be successfully optimizing its working capital management and potentially enhancing its liquidity position.