Sherwin-Williams Co (SHW)
Liquidity ratios
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 0.83 | 0.94 | 1.00 | 1.00 | 0.99 | 1.00 | 0.87 | 0.88 | 0.88 | 0.83 | 0.84 | 0.90 | 1.00 | 1.19 | 1.09 | 0.94 | 1.02 | 1.01 | 0.80 | 0.96 |
| Quick ratio | 0.41 | 0.52 | 0.52 | 0.49 | 0.46 | 0.50 | 0.46 | 0.46 | 0.44 | 0.45 | 0.45 | 0.48 | 0.50 | 0.71 | 0.60 | 0.48 | 0.50 | 0.55 | 0.44 | 0.49 |
| Cash ratio | 0.04 | 0.08 | 0.03 | 0.02 | 0.03 | 0.02 | 0.04 | 0.06 | 0.03 | 0.05 | 0.04 | 0.06 | 0.05 | 0.14 | 0.04 | 0.05 | 0.04 | 0.04 | 0.02 | 0.02 |
Sherwin-Williams Co.'s liquidity ratios, including the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet its short-term obligations.
Beginning with the current ratio, which measures the company's ability to cover its current liabilities with its current assets, we see a fluctuating trend over the quarterly periods. The current ratio decreased from 0.99 in Q4 2022 to 0.83 in Q4 2023, indicating potential liquidity challenges as current assets may not be sufficient to cover current liabilities. The current ratio of less than 1 in Q4 2023 suggests that the company may struggle to meet its short-term obligations.
Moving on to the quick ratio, which is a more stringent measure of liquidity as it excludes inventory from current assets, we see a similar declining trend over the quarters. The quick ratio decreased from 0.55 in Q4 2022 to 0.48 in Q4 2023, indicating a potential decrease in the company's ability to cover its short-term liabilities with its most liquid assets. This trend suggests that the company may be relying more on inventory to meet its short-term obligations.
Lastly, looking at the cash ratio, which provides the most conservative measure of liquidity by only considering cash and cash equivalents, we observe fluctuations but with a general downward trend in the ratios. The cash ratio decreased from 0.12 in Q4 2022 to 0.11 in Q4 2023, indicating that the company may have a lower proportion of cash to cover its short-term liabilities. This trend may raise concerns about the company's cash position and ability to meet immediate payment obligations.
Overall, based on the analysis of Sherwin-Williams Co.'s liquidity ratios, there are indications of potential liquidity challenges, especially in terms of covering short-term obligations with liquid assets. It would be important for the company to monitor and manage its liquidity position closely to ensure its financial health and stability.
See also:
Additional liquidity measure
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 40.21 | 44.17 | 49.56 | 51.54 | 46.66 | 44.43 | 41.50 | 39.80 | 33.81 | 30.48 | 33.63 | 39.10 | 34.57 | 40.46 | 49.69 | 46.63 | 43.09 | 43.29 | 48.54 | 52.07 |
The cash conversion cycle of Sherwin-Williams Co. has fluctuated over the past eight quarters. In Q1 2022, the company had the lowest cash conversion cycle of 33.62 days, indicating a relatively efficient cash management process. However, the cycle increased in subsequent quarters, peaking at 52.50 days in Q1 2023, suggesting a potential slowdown in the company's cash conversion efficiency.
The cycle decreased in Q2 and Q3 2023 but increased slightly again in Q4 2023 to 39.52 days. Despite the quarterly fluctuations, the general trend appears to be an increasing cash conversion cycle over the quarters, which could imply that the company is taking longer to convert its investments in inventory back into cash.
A lengthening cash conversion cycle may signal inefficiencies in the company's operations, such as slow inventory turnover or delayed collection of receivables. Management should closely monitor and analyze the factors impacting the cash conversion cycle to identify areas for improvement and enhance overall liquidity and financial performance.