Otis Worldwide Corp (OTIS)

Based on the liquidity ratios of Otis Worldwide Corp over the past five years, we can derive several insights:

1. Current Ratio:
- The current ratio measures a company's ability to meet its short-term obligations with its current assets. A ratio above 1 indicates that the company has more current assets than current liabilities.
- Otis Worldwide Corp's current ratio has fluctuated over the years, ranging from 0.90 in 2022 to 1.32 in 2021. In 2023, it stood at 0.99, suggesting a slight decrease in the company's ability to cover its short-term liabilities with current assets.

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.
- Otis Worldwide Corp's quick ratio has also shown variability, with values between 0.81 and 0.95 over the past five years. In 2023, the quick ratio was 0.89, indicating a decline from the previous year.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity ratio as it only considers cash and cash equivalents as a proportion of current liabilities.
- Otis Worldwide Corp's cash ratio has ranged from 0.32 to 0.41 since 2019. In 2023, the cash ratio was 0.35, which implies that the company had $0.35 in cash for every dollar of current liabilities.

Overall, the liquidity ratios of Otis Worldwide Corp, particularly the current and quick ratios, indicate some variation in the company's ability to cover its short-term obligations with its liquid assets. It is important for investors and stakeholders to monitor these ratios over time to assess the company's liquidity position accurately.

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Additional liquidity measure

The cash conversion cycle of Otis Worldwide Corp has shown fluctuations over the past five years. The company's ability to convert its resources efficiently into cash has improved in the most recent year, with the cycle decreasing to 44.75 days at the end of December 31, 2023, from 48.42 days in the previous year. This reduction indicates that Otis Worldwide Corp is managing its cash flow and working capital more effectively, which is a positive sign for the company's operational efficiency.

Comparing the cycle to previous years, it is evident that there was a significant increase in the cash conversion cycle from December 31, 2019, to December 31, 2020, where it reached a peak of 57.79 days. However, the company has been able to bring this down steadily over the next couple of years.

Overall, a lower cash conversion cycle is generally considered favorable as it signifies that the company is efficiently managing its working capital, converting inventories to sales, collecting receivables promptly, and settling payables in a timely manner. Otis Worldwide Corp's ability to reduce its cash conversion cycle indicates improved operational performance and financial management in recent years.