Rollins Inc (ROL)

Rollins Inc's liquidity ratios have shown some fluctuations over the past five years. The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has been hovering around 0.7, indicating that the company may have difficulty meeting its short-term obligations.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also been relatively low, ranging from 0.5 to 0.6. This suggests that Rollins Inc may struggle to meet its immediate payment obligations without relying on inventory.

The cash ratio, which provides the most conservative estimate of liquidity by only considering cash and cash equivalents, has been on a declining trend from 0.21 in 2020 to 0.14 in 2024. This indicates that the company's capacity to cover its short-term liabilities solely with cash has weakened over the period.

Overall, based on the liquidity ratios analysis, Rollins Inc may face challenges in meeting its short-term financial obligations without relying heavily on inventory or other non-cash assets. It is important for the company to closely monitor its liquidity position and take appropriate measures to improve its ability to manage short-term cash flows effectively.

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Additional liquidity measure

The cash conversion cycle provides insights into the efficiency of Rollins Inc's management of cash flow from operations to collection. From December 31, 2020, where the metric was -2.41 days (indicating a rapid cash flow cycle), there has been a notable positive shift to 22.21 days on December 31, 2021. This suggests the company is taking longer to convert its investments in inventory into cash receipts from sales.

Further, the trend continues with slight increases in subsequent years, reaching 24.17 days by December 31, 2024. The consistent lengthening of the cash conversion cycle may indicate potential challenges in efficiently managing working capital components such as inventory, accounts receivable, and accounts payable.

Overall, Rollins Inc should focus on strategies to optimize its inventory turnover, reduce accounts receivable collection times, and effectively manage payment terms with suppliers to enhance cash conversion efficiency and overall liquidity position.