RPM International Inc (RPM)

The liquidity ratios of RPM International Inc. over the analyzed period reveal a pattern of overall stability with some fluctuations, indicative of effective short-term liquidity management.

Current Ratio Analysis:
The current ratio, which measures the company’s ability to meet its short-term obligations with its current assets, generally remained above 2.0 throughout the period, signaling a robust liquidity position. It experienced minor dips in the early months of 2021, reaching as low as 1.86 in November 2021, and then saw a decline to approximately 1.45 by February 2022. Subsequently, the ratio tended to recover, rising above 2.0 again by mid-2022 and maintaining this level through 2023, peaking at 2.75 in February 2023. Toward the latter months of 2024 and into 2025, the ratio stabilized within the 2.0-2.3 range, reflecting consistency in short-term asset coverage.

Quick Ratio Analysis:
The quick ratio, which excludes inventory from current assets to assess immediate liquidity, followed a similar but somewhat more variable trend. It was above 1.0 for the majority of the period, indicating a solid position to cover immediate liabilities without relying on inventory sales. Notably, the quick ratio declined to about 0.92 in November 2021 and to 0.66 in February 2022, which signifies decreased short-term liquidity in those periods. After this trough, it recovered and remained generally above 1.0, reaching a high of approximately 1.31 in August 2023. The ratios through the latter part of the period demonstrate the company’s capacity to meet short-term liabilities with its most liquid assets.

Cash Ratio Analysis:
The cash ratio, measuring the most liquid assets (cash and cash equivalents) against current liabilities, remained at conservative yet stable levels. It fluctuated within a narrow band, from a low of 0.10 in February 2022 to a high of 0.24 in November 2020. Recent data indicate a consistent cash ratio around 0.18 to 0.21, reflecting that the company's cash holdings are sufficient to cover approximately 18-21% of short-term liabilities at any time. This suggests a cautious but effective liquidity position, seldom overly reliant solely on cash.

Overall Observation:
Across the examined timeframe, RPM International Inc. has maintained strong current and quick ratios, generally well above critical thresholds, indicating substantial liquidity buffers. The occasional dips align with typical operational fluctuations; however, these have not compromised the company's overall capacity to meet short-term obligations. The stability in liquidity ratios over time demonstrates disciplined asset management and prudent liquidity planning, providing resilience and flexibility in the company’s short-term financial management.

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Additional liquidity measure

The analysis of RPM International Inc.'s cash conversion cycle (CCC) over the period from August 2020 through May 2025 reveals notable fluctuations with an overall trend towards gradual improvement. Initially, the CCC was approximately 102.09 days as of August 2020, indicating that it took about 102 days for the company to convert its investments in inventory and receivables into cash after accounting for its payables.

Throughout 2020 and into early 2021, the CCC experienced a slight decreasing trend, reaching its lowest point of approximately 97.98 days by late February 2021. This suggests an improvement in short-term liquidity management, with faster conversion of resources into cash. The cycle then stabilized around 98 to 103 days during the remainder of 2021, reflecting relatively steady operational efficiency.

However, from late 2021 through mid-2022, the CCC showed an upward trend, peaking at approximately 119.21 days in August 2022. This increase indicates a lengthening of the period required to turn inventories and receivables into cash, potentially pointing to inefficiencies in inventory management, longer receivables collection periods, or changes in payment terms.

Following the peak in late 2022, a downward trajectory begins, with the CCC decreasing to roughly 105.72 days by August 2023 and further down to approximately 97.62 days by February 2024. This decline signifies an improvement in operational cycles, likely driven by better receivables collection, improved inventory turnover, or more favorable payables management.

In the most recent data up to May 2025, the CCC is around 98.41 days, close to early 2021 levels, illustrating a return to more efficient cash conversion practices. Overall, the period demonstrates cycles of cyclical efficiency gains and setbacks, with recent figures indicating a healthier and more efficient working capital cycle compared to the peaks observed in late 2022.

This pattern reflects RPM International Inc.'s varying operational efficiencies and liquidity management strategies, highlighting an overarching trend toward stabilization and improved cash flow management in recent periods.