3M Company (MMM)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.07 | 1.54 | 1.70 | 1.89 | 1.41 |
| Quick ratio | 0.70 | 0.88 | 1.04 | 1.23 | 0.58 |
| Cash ratio | 0.39 | 0.41 | 0.53 | 0.63 | 0.06 |
The liquidity ratios of 3M Co. provide insights into the company's ability to meet its short-term obligations and cover immediate liabilities. Looking at the trend over the past five years:
1. Current Ratio:
- 3M's current ratio has shown a declining trend from 1.41 in 2019 to 1.07 in 2023. This indicates that the company's current assets may not be as sufficient compared to its current liabilities as they were in previous years.
- The current ratio of 1.07 in 2023 suggests that 3M may have slightly more current assets than current liabilities, but it is closer to a 1:1 ratio, which may raise concerns about the company's short-term liquidity.
2. Quick Ratio:
- The quick ratio also follows a similar decreasing trend, dropping from 0.96 in 2019 to 0.76 in 2023. This indicates a reduction in the company's ability to quickly cover its short-term obligations without relying on inventory.
- A quick ratio of 0.76 in 2023 suggests that 3M may face challenges meeting its immediate liabilities using only its most liquid assets.
3. Cash Ratio:
- The cash ratio has shown fluctuations over the years but remains relatively low, with a latest value of 0.44 in 2023. This indicates that 3M holds a lower proportion of cash and cash equivalents compared to current liabilities.
- A cash ratio of 0.44 in 2023 implies that 3M's cash reserves alone may not be sufficient to cover its immediate obligations, signaling a potential liquidity risk.
Overall, the liquidity ratios of 3M Co. suggest a downward trend in the company's ability to meet its short-term obligations. Management should closely monitor these ratios and consider strategies to improve liquidity, such as reducing current liabilities or increasing cash reserves.
See also:
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 84.20 | 89.87 | 86.77 | 90.24 | 95.01 |
The cash conversion cycle for 3M Co. has shown a fluctuating trend over the past five years. In 2023, the cash conversion cycle decreased to 84.20 days from 89.87 days in 2022, indicating an improvement in the company's ability to convert its inventory and receivables into cash. This trend aligns with the company's focus on efficient working capital management.
Comparing the data with 2021 and 2020, we see that the cash conversion cycle has generally been decreasing, which suggests that 3M Co. has been able to streamline its operations and enhance its cash flow efficiency over the years. The decrease from 2022 to 2023 is particularly noteworthy as it reflects a more efficient management of inventory and receivables.
Despite the improvements seen in recent years, the cash conversion cycle in 2023 remains higher than the levels observed in 2019. This indicates that there may still be room for further optimization of working capital processes within the company. By continuing to focus on reducing the time it takes to convert inventory and receivables into cash, 3M Co. can further strengthen its financial performance and liquidity position in the market.