Phillips 66 (PSX)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.19 | 1.26 | 1.38 | 1.15 | 1.39 |
| Quick ratio | 0.12 | 0.21 | 0.41 | 0.25 | 1.70 |
| Cash ratio | 0.12 | 0.21 | 0.41 | 0.25 | 1.70 |
The liquidity ratios of Phillips 66 indicate a fluctuating but generally satisfactory liquidity position over the years. The current ratio, which measures the company's ability to cover short-term liabilities with current assets, decreased from 1.39 in 2020 to 1.15 in 2021, before improving to 1.38 in 2022, and then dropped to 1.26 in 2023, and further to 1.19 in 2024.
The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, decreased significantly from 1.70 in 2020 to 0.25 in 2021, and improved slightly to 0.41 in 2022, but deteriorated to 0.21 in 2023 and further to 0.12 in 2024. This suggests a decline in the company's ability to meet its short-term obligations without relying on inventory.
The cash ratio, which indicates the proportion of current liabilities that could be covered by cash and cash equivalents, followed a similar pattern to the quick ratio, with a decrease from 1.70 in 2020 to 0.25 in 2021, then a slight improvement to 0.41 in 2022, and declines to 0.21 in 2023 and 0.12 in 2024. This indicates a decreasing ability to cover short-term liabilities with cash assets alone.
Overall, the declining trend in quick and cash ratios suggests a potential liquidity concern for Phillips 66, as the company may face challenges in meeting its short-term obligations without relying heavily on inventory or non-cash assets. Management should closely monitor and possibly take actions to strengthen the company's liquidity position in the future.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 11.02 | 10.05 | 7.89 | 11.95 | 24.04 |
The cash conversion cycle of Phillips 66 has shown a positive trend of improvement over the years, decreasing from 24.04 days as of December 31, 2020, to 11.02 days as of December 31, 2024. This indicates the company's ability to efficiently convert its investments in raw materials into cash receipts from customers. The decreasing trend suggests that Phillips 66 has been effectively managing its working capital components like inventory, accounts payable, and accounts receivable.
In 2021, there was a significant drop in the cash conversion cycle to 11.95 days, indicating a considerable improvement in the company's operational efficiency. However, in 2022, there was a further reduction to 7.89 days, showcasing an even more efficient management of working capital. The slight increase in the cash conversion cycle to 10.05 days in 2023 might be attributed to changes in the company's operating cycle or temporary disruptions in the supply chain.
Overall, the decreasing trend in Phillips 66's cash conversion cycle signifies its ability to optimize cash flow by efficiently managing its working capital and converting investments into cash at a faster pace. This improvement reflects positively on the company's operational performance and financial management strategies.