RPM International Inc (RPM)

RPM International Inc's liquidity ratios, specifically the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet its short-term financial obligations.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, decreased from 2.22 in 2020 to 1.97 in 2024. This downward trend indicates a relative decline in the company's short-term liquidity position over the years, although the ratio still remains above 1, suggesting that RPM International Inc has sufficient current assets to cover its current liabilities.

The quick ratio, also known as the acid-test ratio, focuses on the company's most liquid assets (such as cash and marketable securities) to cover its current liabilities. Similarly, the quick ratio declined from 1.34 in 2020 to 1.22 in 2024. While this ratio has also decreased, it still indicates that the company has an acceptable level of liquidity to meet its short-term obligations.

The cash ratio, which is the most conservative liquidity metric, shows how well the company can cover its current liabilities with its cash and cash equivalents. RPM International Inc's cash ratio decreased from 0.30 in 2020 to 0.25 in 2024. Even though the cash ratio has declined, the company still maintains a decent cash position relative to its current liabilities.

Overall, RPM International Inc's liquidity ratios demonstrate a slight decline in liquidity over the years, as evidenced by the decreasing trend in the current ratio, quick ratio, and cash ratio. While the ratios indicate a decrease in short-term liquidity, the company still appears to have adequate liquidity to meet its immediate financial obligations.

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Additional liquidity measure

The cash conversion cycle of RPM International Inc has shown a fluctuating trend over the past five years, ranging from a low of 88.76 days in 2024 to a high of 103.23 days in 2022. A lower cash conversion cycle indicates the company is able to convert its investments in raw materials and other resources into sales and cash receipts more efficiently.

In general, a shorter cash conversion cycle is favorable as it indicates the company is able to collect cash from its customers more quickly, pay its suppliers later, and efficiently manage its working capital. Conversely, a longer cash conversion cycle can suggest inefficiencies in the company's operations, such as slow collection of receivables or excessive inventory levels.

Therefore, RPM International Inc should aim to continue improving its cash conversion cycle to enhance its operational efficiency and financial performance. Regular monitoring and analysis of this key metric can help the company identify areas for optimization and implement strategies to streamline its cash flows.