Terex Corporation (TEX)

Terex Corp.'s liquidity ratios depict 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 short-term obligations with current assets, has been relatively stable over the past five years, ranging from 1.94 to 2.60. A higher current ratio indicates a stronger liquidity position, with the company having more current assets to cover its current liabilities.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Terex Corp.'s quick ratio has fluctuated between 0.95 and 1.75 over the same period. A quick ratio above 1 signifies that the company can meet its short-term obligations without relying on selling inventory.

The cash ratio, the most conservative liquidity measure, focuses solely on cash and cash equivalents compared to current liabilities. Terex Corp.'s cash ratio has varied from 0.43 to 1.22, indicating the company's ability to cover its short-term liabilities solely with its cash reserves.

Overall, Terex Corp. has maintained relatively healthy liquidity ratios over the past five years, with the current ratio consistently above 1.5, the quick ratio above 1, and the cash ratio fluctuating but remaining above 0.4. This suggests that the company has sufficient liquid assets to meet its short-term financial obligations.

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Additional liquidity measure

The cash conversion cycle of Terex Corp. has shown a somewhat fluctuating trend over the past five years. The cycle measures the time it takes for the company to convert its investments in inventory and other resources into cash inflows from sales.

In 2019, the company had a relatively efficient cash conversion cycle of 69.47 days, indicating that it was able to swiftly convert its resources into cash. However, over the subsequent years, the cycle increased, reaching its peak at 83.20 days in 2023.

This increase in the cash conversion cycle suggests that Terex Corp. may be taking longer to convert its investments into cash inflows, which can potentially impact its liquidity and working capital management. It is important for the company to analyze the reasons behind this trend and implement strategies to improve its cash conversion efficiency in order to maintain a healthy financial position and operational effectiveness.