Timken Company (TKR)

Liquidity ratios

Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Current ratio 3.07 1.79 2.47 2.47 2.36
Quick ratio 0.45 0.31 0.37 0.35 0.42
Cash ratio 0.45 0.31 0.37 0.35 0.42

Based on the provided data for Timken Company's liquidity ratios, let's analyze the key ratios:

1. Current Ratio:
- The current ratio represents the company's ability to pay off its short-term liabilities with its short-term assets.
- Timken Company's current ratio has shown a fluctuating trend over the years, ranging from 1.79 in 2023 to 3.07 in 2024.
- A current ratio greater than 1 indicates that the company has more current assets than current liabilities, which is a positive sign for its short-term liquidity.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets.
- Timken Company's quick ratio has also fluctuated over the years, with values ranging from 0.31 in 2023 to 0.45 in 2024.
- A quick ratio above 1 is generally considered healthy, indicating that the company can meet its short-term obligations without relying on selling inventory.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity ratio, measuring the proportion of current liabilities that can be covered by cash and cash equivalents.
- Timken Company's cash ratio has mirrored the quick ratio trend, ranging from 0.31 in 2023 to 0.45 in 2024.
- A cash ratio of 1 or higher suggests that the company can cover its short-term liabilities using only cash and cash equivalents, providing a strong indication of financial stability.

In summary, Timken Company's liquidity ratios have exhibited some variability over the years, with the current ratio showing a more stable trend compared to the quick and cash ratios. The overall liquidity position appears favorable, especially in 2024 when both the current and quick ratios improved significantly. Further analysis and comparison with industry benchmarks would provide a more comprehensive assessment of the company's liquidity position.


Additional liquidity measure

Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Cash conversion cycle days 139.32 135.20 135.52 125.59 122.67

The cash conversion cycle of Timken Company has shown a slight increase over the period from December 31, 2020, to December 31, 2024. Starting at 122.67 days at the end of 2020, the cycle lengthened to 125.59 days by the end of 2021. Subsequently, there was a more pronounced uptick to 135.52 days by December 31, 2022. The cash conversion cycle remained relatively stable in the following year, with a minor decrease to 135.20 days by the end of 2023. However, by the end of 2024, the cycle increased to 139.32 days. Overall, this trend indicates that Timken Company took longer to convert its investments in inventory into cash, potentially facing challenges in managing its working capital efficiently over the years.