Transdigm Group Incorporated (TDG)

Transdigm Group Incorporated's liquidity ratios indicate the company's ability to meet its short-term obligations with its current assets. The current ratio, which measures the firm's ability to cover its short-term liabilities with its current assets, has decreased over the past five years, from 4.31 in 2020 to 1.58 in 2024. This suggests that the company may have a declining ability to cover its short-term obligations over this period.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also shows a decreasing trend from 3.36 in 2020 to 1.21 in 2024. This indicates that Transdigm's ability to meet its short-term obligations without relying on inventory has weakened over the years.

The cash ratio, which provides the most conservative measure of liquidity by comparing cash and cash equivalents to current liabilities, has also declined from 2.92 in 2020 to 0.99 in 2024. This suggests that the company's cash position relative to its short-term liabilities has deteriorated over the past five years.

Overall, Transdigm Group Incorporated's liquidity ratios show a decreasing trend, which may raise concerns about the company's ability to meet its short-term obligations. Management should closely monitor liquidity levels and consider strategies to improve cash flow and liquidity position to ensure financial stability.

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Additional liquidity measure

The cash conversion cycle for Transdigm Group Incorporated has shown some fluctuation over the past five years. In 2024, the company's cash conversion cycle was 236.94 days, which is a slight improvement from the previous year's 242.63 days. However, compared to 2022 and 2021, the cycle has increased, indicating a longer period for the company to convert investments in inventory into cash inflows from sales.

Overall, over the past five years, Transdigm has experienced some variability in its cash conversion cycle, with a general trend of lengthening cycle durations. This suggests potential inefficiencies in managing inventory levels, collecting receivables, and paying suppliers, impacting the company's working capital management and potentially affecting its overall liquidity position. Further analysis would be needed to assess the specific drivers behind these fluctuations and their impact on the company's financial performance.