PPG Industries Inc (PPG)

PPG Industries Inc's liquidity ratios show the following trends over the years:

1. Current Ratio: The company's current ratio has been relatively stable, improving from 1.41 in 2020 to 1.52 in 2022 before declining to 1.31 in 2024. The current ratio measures the company's ability to meet its short-term obligations using its current assets. A current ratio above 1 indicates that the company has more current assets than current liabilities, which is generally favorable.

2. Quick Ratio: PPG Industries Inc's quick ratio, also known as the acid-test ratio, has fluctuated over the years, with a low of 0.23 in 2021 and a high of 0.31 in 2023. The quick ratio considers only the most liquid assets (cash, marketable securities, and receivables) to assess the company's ability to pay off current liabilities without relying on inventory sales. A quick ratio above 1 is considered healthy, but the company's ratios have been below this threshold.

3. Cash Ratio: The cash ratio, which specifically looks at the company's ability to cover current liabilities with cash and cash equivalents, has shown a similar pattern to the quick ratio. The cash ratio was also below 1 in all years, ranging from 0.23 in 2021 to 0.40 in 2020. A cash ratio below 1 indicates a reliance on non-cash current assets to meet short-term obligations.

Overall, while PPG Industries Inc's current ratio suggests a comfortable position in meeting short-term obligations, both the quick ratio and cash ratio indicate a lower level of liquidity, signaling potential challenges in quickly servicing immediate financial obligations without relying on inventory or other less liquid assets. It may be beneficial for the company to closely monitor and potentially improve its quick liquidity position to enhance its overall financial stability.

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Additional liquidity measure

PPG Industries Inc's cash conversion cycle has seen a gradual decrease over the past five years. Starting at 81.43 days on December 31, 2020, it has decreased to 77.04 days by December 31, 2021, further dropping to 74.74 days by December 31, 2022. The cycle continued to improve and reached 72.56 days by December 31, 2023, and slightly increased to 72.83 days by December 31, 2024. This indicates that the company has been able to streamline its operations efficiently in terms of managing its cash conversion cycle, which measures the average time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A shorter cash conversion cycle suggests better liquidity management and more efficient use of working capital within the company.