RPM International Inc (RPM)

The analysis of RPM International Inc.'s liquidity ratios over the period from May 31, 2021, to May 31, 2025, reveals several key trends and insights:

Current Ratio:
The current ratio, which measures the company's ability to meet its short-term obligations with its short-term assets, fluctuated during the period. It was at 2.09 in May 2021, decreased to 1.56 in May 2022, then increased again to 2.14 in May 2023 before slightly declining to 1.97 in May 2024 and rising again to 2.16 in May 2025. These movements suggest that RPM has maintained a generally healthy liquidity position, with the ratio remaining above 1.5 in most periods, indicating adequate short-term asset coverage of current liabilities. The fluctuations may reflect changes in asset composition or liabilities but do not indicate a significant deterioration in liquidity.

Quick Ratio:
The quick ratio, which excludes inventory from current assets, shows a more marked fluctuation. It was 1.15 in May 2021, dropped to 0.81 in May 2022, then recovered to 1.16 in May 2023, with marginal increases to 1.17 in May 2024 and 1.23 in May 2025. The decline below 1.0 in 2022 indicates a period where liquid assets (excluding inventory) were insufficient to cover current liabilities, possibly implying tighter liquidity. The subsequent recovery above 1.0 suggests improved liquidity, with the ratio indicating the company's ability to meet short-term obligations with highly liquid assets.

Cash Ratio:
The cash ratio, representing the most conservative measure of liquidity by comparing cash and cash equivalents to current liabilities, remained relatively low throughout the period. It was 0.19 in May 2021, declining slightly to 0.10 in May 2022, then gradually increasing to 0.15 in 2023, 0.17 in 2024, and reaching 0.21 in 2025. Although these figures are below 0.25, they demonstrate a modest but improving cash cushion relative to current liabilities. The overall trend indicates a cautious cash liquidity approach with limited reliance on cash alone to cover short-term obligations but with some improvement in recent years.

Summary:
Overall, RPM International Inc. maintains a solid liquidity position, with current ratios comfortably above 1.5 for most of the period, indicating sufficient current assets to cover short-term liabilities. The quick ratio's fluctuation highlights periods of tighter liquidity, particularly in 2022, but the recovery suggests resilience and improving liquidity management. The cash ratio remains conservative but shows a gradual upward trend, reflecting improved cash holdings relative to current liabilities. Collectively, these ratios portray a company with stable short-term liquidity, with no immediate concerns about its ability to meet short-term obligations, although certain periods necessitated closer scrutiny of liquidity sources.

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Additional liquidity measure

The cash conversion cycle (CCC) of RPM International Inc. over the analyzed period demonstrates notable fluctuations, reflecting changes in the company’s operational efficiency related to inventory management, receivables, and payables.

As of May 31, 2021, the CCC was approximately 98.35 days. This indicates that, on average, it took the company just over three months to convert its investments in inventory and receivables into cash, after accounting for the time taken to settle its payables.

By May 31, 2022, the CCC increased significantly to approximately 113.16 days. This rise suggests a slowdown in cash conversion efficiency, potentially driven by longer inventory holding periods, extended receivable collection times, or a delay in paying suppliers.

The subsequent year, by May 31, 2023, the CCC marginally decreased to around 112.41 days. Although slightly lower than the previous year, it continued to reflect a period exceeding three and a half months to convert operations into cash, indicating persistent cyclical or operational challenges.

A notable improvement was observed by May 31, 2024, when the CCC declined sharply to approximately 99.43 days. This reduction signifies enhanced operational efficiency, possibly due to shorter inventory turnover, improved receivable collections, or more favorable payables strategies.

Finally, by May 31, 2025, the CCC stabilized around 98.41 days, aligning closely with the cycle observed in 2021. This stability suggests that RPM International Inc. has managed to maintain a relatively consistent and efficient cash conversion cycle in recent years.

Overall, the period examined reveals fluctuations in the company's cash conversion cycle, with a peak in 2022 and subsequent improvement thereafter. These changes highlight the company’s efforts toward optimizing working capital management and operational efficiency over the analyzed timeframe.