Terex Corporation (TEX)

Terex Corporation's liquidity ratios have exhibited fluctuations over the years. The current ratio, which measures the company's ability to cover short-term obligations with current assets, decreased from 2.60 in 2020 to 1.94 in 2021 but showed a slight improvement to 2.16 in 2024. This indicates a decline in short-term liquidity in 2021 followed by a recovery in subsequent years.

The quick ratio, a more stringent measure of liquidity as it excludes inventory from current assets, also dropped from 1.45 in 2020 to 0.85 in 2021, remaining stable at around 0.85 in 2022 and 2023, before rising to 0.96 in 2024. This suggests that the company may have had difficulties meeting immediate obligations in 2021 but managed to enhance its quick liquidity position in the following years.

Furthermore, the cash ratio, which focuses on the ability to cover short-term liabilities with cash and cash equivalents, fell from 0.92 in 2020 to 0.29 in 2021, gradually increasing to 0.36 by 2024. This indicates a significant reduction in cash reserves relative to short-term obligations in 2021, followed by an improvement in liquidity position over the next few years.

Overall, while Terex Corporation experienced some liquidity challenges in 2021, the company managed to strengthen its liquidity position in the subsequent years, with improvements observed in both current and quick ratios as well as the cash ratio.

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Additional liquidity measure

The cash conversion cycle of Terex Corporation has shown a slight increase over the years, from 79.83 days as of December 31, 2020, to 96.76 days as of December 31, 2024. This trend indicates that the company is taking longer to convert its investments in inventory and accounts receivable into cash. A longer cash conversion cycle may suggest inefficiencies in managing inventory, collecting receivables, or negotiating favorable payment terms with suppliers. Terex Corporation may need to streamline its operations to improve cash flow and overall liquidity.