Otis Worldwide Corp (OTIS)
Liquidity ratios
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 0.99 | 1.00 | 0.90 | 0.90 | 0.90 | 0.97 | 0.97 | 1.18 | 1.32 | 1.00 | 0.99 | 0.99 | 0.97 |
| Quick ratio | 0.78 | 0.79 | 0.69 | 0.69 | 0.69 | 0.72 | 0.73 | 0.71 | 0.80 | 0.80 | 0.81 | 0.81 | 0.79 |
| Cash ratio | 0.20 | 0.24 | 0.17 | 0.16 | 0.17 | 0.17 | 0.19 | 0.19 | 0.25 | 0.24 | 0.29 | 0.27 | 0.27 |
Otis Worldwide Corp's liquidity ratios provide insights into the company's ability to meet its short-term obligations.
The current ratio fluctuated between 0.90 and 1.00 over the past eight quarters, indicating a somewhat stable but slightly lower than ideal level of current assets relative to current liabilities. A current ratio of 1.00 or higher is generally considered healthy, suggesting the company may sometimes struggle to cover its short-term liabilities.
Similarly, the quick ratio ranged from 0.81 to 0.91 during the same period, reflecting a consistent trend of having a lower level of highly liquid assets available to cover immediate obligations. A higher quick ratio is preferred as it excludes inventory from current assets, providing a more conservative measure of liquidity.
The cash ratio, which measures the company's ability to cover current liabilities using only cash and cash equivalents, ranged from 0.31 to 0.40. This ratio indicates that Otis Worldwide Corp may have limited cash reserves relative to its short-term obligations, potentially facing challenges in meeting immediate payment needs.
Overall, Otis Worldwide Corp's liquidity ratios suggest that the company may need to focus on enhancing its liquidity position by either increasing its cash reserves or better managing its current assets and liabilities to ensure smooth operations and financial stability in the short term.
Additional liquidity measure
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -130.98 | -95.79 | -112.33 | -72.05 | -115.83 | -82.31 | -93.85 | -65.51 | -73.81 | -82.77 | -56.46 | -34.86 | 21.44 |
The cash conversion cycle is a measure of how efficiently a company is managing its working capital. It represents the time it takes for a company to convert its investments in inventory and other resources into cash from sales.
Analyzing the data provided for Otis Worldwide Corp, we can see that the cash conversion cycle has fluctuated over the past eight quarters. In Q1 2022, the company had a cash conversion cycle of 51.47 days, which decreased to 45.39 days in Q2 2022 before increasing to 47.85 days in Q3 2022. This trend continued with fluctuations in the following quarters.
A lower cash conversion cycle indicates that the company is able to sell its inventory and collect cash from customers more quickly, which is generally favorable as it signifies efficient working capital management. Conversely, a higher cash conversion cycle may suggest inefficiencies in inventory management or extended credit terms to customers, which could tie up cash for longer periods.
Overall, Otis Worldwide Corp should strive to maintain a downward trend in its cash conversion cycle to improve its working capital efficiency and optimize its cash flow management. Monitoring and analyzing this metric regularly can help the company identify areas for improvement and make informed decisions to enhance its financial performance.