Sherwin-Williams Co (SHW)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 0.79 | 0.83 | 0.99 | 0.88 | 1.00 |
| Quick ratio | 0.03 | 0.04 | 0.03 | 0.03 | 0.05 |
| Cash ratio | 0.03 | 0.04 | 0.03 | 0.03 | 0.05 |
The liquidity ratios of Sherwin-Williams Co based on the provided data demonstrate challenges in meeting its short-term obligations with its current assets.
1. Current Ratio: The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has been fluctuating over the years. While a current ratio of 1.00 in December 2020 and 0.99 in December 2022 indicates a relatively balanced situation, the declines to 0.88 in December 2021, 0.83 in December 2023, and 0.79 in December 2024 suggest a decreasing ability to meet short-term obligations.
2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. The trend of the quick ratio remaining low over the years (ranging from 0.03 to 0.05) indicates a limited ability of Sherwin-Williams Co to pay off its current liabilities without relying on selling inventory.
3. Cash Ratio: The cash ratio, which specifically looks at a company's ability to pay off current liabilities with only cash and cash equivalents, has also been consistently low (ranging from 0.03 to 0.05). This suggests that the company heavily relies on other current assets besides cash to cover its short-term obligations.
In summary, Sherwin-Williams Co faces liquidity challenges as indicated by its declining current ratio, persistently low quick ratio, and limited cash ratio. It may need to carefully manage its short-term assets and liabilities to ensure it can meet its financial obligations timely and efficiently.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 70.16 | 69.17 | 74.76 | 61.69 | 68.03 |
The cash conversion cycle for Sherwin-Williams Co has shown fluctuating trends over the past five years. The cycle was 68.03 days at the end of 2020, decreased to 61.69 days at the end of 2021, and then increased to 74.76 days at the end of 2022. Subsequently, there was a slight decrease to 69.17 days at the end of 2023, followed by a slight increase to 70.16 days at the end of 2024.
A decreasing cash conversion cycle indicates that the company is managing its cash, inventory, and receivables more efficiently, which is generally a positive sign. However, the increasing trend from 2022 to 2024 may indicate possible challenges in managing working capital effectively.
Overall, a comprehensive analysis of the cash conversion cycle suggests that Sherwin-Williams Co has experienced some fluctuations in their cash conversion efficiency over the years, and it is important for the company to closely monitor and manage its working capital components to optimize cash flow in the future.