Stanley Black & Decker Inc (SWK)

Stanley Black & Decker Inc's liquidity ratios indicate the company's ability to meet its short-term obligations.

1. Current Ratio:
- The current ratio has fluctuated over the years, starting at 1.32 in 2020 and decreasing to 0.97 in 2021 before showing a slight improvement to 1.22 in 2022 and then lowering to 1.19 in 2023. However, there was a significant drop to 0.11 in 2024.
- A current ratio below 1 suggests that the company may have difficulty meeting its short-term liabilities with its current assets. The declining trend and the low ratio in 2024 raise concerns about the company's liquidity position.

2. Quick Ratio:
- The quick ratio, which provides a more stringent measure of liquidity by excluding inventory, started at a very low 0.30 in 2020, dropped further to 0.02 in 2021, and then improved slightly to 0.06 in 2022 and 0.08 in 2023. However, it declined to 0.11 in 2024.
- A quick ratio below 1 indicates that the company may struggle to meet its immediate liabilities without relying on selling inventory. The continued low quick ratio is a red flag for potential liquidity issues.

3. Cash Ratio:
- The cash ratio, reflecting the company's ability to cover its current liabilities with cash and cash equivalents, followed a similar trend to the quick ratio, with values of 0.30 in 2020, 0.02 in 2021, 0.06 in 2022, 0.08 in 2023, and 0.11 in 2024.
- A cash ratio significantly below 1 suggests a limited ability to pay off short-term obligations with available cash, indicating potential financial strain for the company.

Overall, the declining trend in the current ratio, quick ratio, and cash ratio over the years, culminating in very low ratios in 2024, raises concerns about Stanley Black & Decker Inc's liquidity position and ability to meet its short-term obligations. Investors and stakeholders should monitor these ratios closely for any signs of improvement or deterioration.

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Additional liquidity measure

The cash conversion cycle for Stanley Black & Decker Inc has shown fluctuations over the past five years. In December 2020, the company had a cash conversion cycle of 104.44 days, indicating that it took approximately 104.44 days for the company to convert its investments in inventory into cash flows from sales.

However, by December 2021, the cash conversion cycle had significantly increased to 190.74 days, suggesting a longer period for the company to convert its inventory investments into cash. This elongated cycle may have been due to various factors such as slower inventory turnover or extended accounts receivable collection periods.

In December 2022, there was a slight decrease in the cash conversion cycle to 168.94 days, indicating some improvement in the company's efficiency in managing its working capital. This improvement might have been a result of more effective inventory management or streamlined cash collection processes.

By December 2023, the cash conversion cycle further decreased to 148.04 days, showing continued progress in the company's working capital management. This reduction suggests that Stanley Black & Decker Inc was able to enhance its operational efficiency and shorten the time taken to convert its investments in inventory into cash.

In the most recent data available in December 2024, the cash conversion cycle increased slightly to 152.59 days. Although there was a minor uptick in the cycle, the overall trend indicates that the company has been making efforts to optimize its working capital management.

Overall, analyzing the cash conversion cycle provides insights into Stanley Black & Decker Inc's liquidity and operational efficiency. The company's ability to shorten the cycle indicates effective working capital management, while longer cycles may imply inefficiencies in inventory management, accounts receivable collections, or accounts payable payments.