Norfolk Southern Corporation (NSC)

The liquidity ratios of Norfolk Southern Corp. indicate the company's ability to meet its short-term obligations.

1. Current Ratio:
- The current ratio has increased over the years from 0.90 in 2019 to 1.24 in 2023. This ratio suggests that the company's current assets are 1.24 times its current liabilities, showing an improvement in its short-term liquidity position. A current ratio above 1 indicates that the company can cover its short-term obligations.

2. Quick Ratio:
- The quick ratio has also shown improvement over the years, from 0.80 in 2019 to 1.14 in 2023. The quick ratio excludes inventory from current assets, providing a more conservative measure of liquidity. A quick ratio above 1 indicates that the company can meet its short-term obligations without relying on inventory.

3. Cash Ratio:
- The cash ratio has fluctuated but generally improved from 0.40 in 2019 to 0.71 in 2023. This ratio measures the company's ability to cover its current liabilities with its cash and cash equivalents only. A cash ratio of 0.71 in 2023 suggests that the company holds enough cash to cover 71% of its current liabilities.

Overall, the upward trend in the current, quick, and cash ratios reflects an improvement in Norfolk Southern Corp.'s liquidity position over the years, indicating the company's ability to meet its short-term financial obligations.

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See also:

Norfolk Southern Corporation Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of Norfolk Southern Corp. has shown a slight increase over the past five years, indicating a lengthening of the time it takes for the company to convert its investments in inventory and other resources into cash. This trend suggests potential inefficiencies in the company's working capital management or operational processes.

In 2023, the cash conversion cycle increased to 34.44 days from 32.88 days in 2022. This indicates that the company took longer to convert its investments in inventory and accounts receivable into cash during the year. This increase may be attributed to various factors such as a slowdown in sales, inventory management issues, or delays in collecting receivables.

Comparing the cash conversion cycle to previous years, there has been a general upward trend since 2019 when the cycle was at its lowest at 29.73 days. The increasing trend suggests a potential need for Norfolk Southern Corp. to focus on improving its inventory management, streamlining its accounts receivable processes, and possibly negotiating better payment terms with suppliers to optimize its cash conversion cycle and overall working capital efficiency.