Tennant Company (TNC)

The liquidity ratios of Tennant Co. over the past five years indicate the company's ability to meet its short-term financial obligations.

1. Current Ratio:
- The current ratio measures the company's ability to pay off its short-term liabilities with its current assets.
- Tennant Co.'s current ratio has fluctuated between 1.75 and 2.20 over the past five years, with a current ratio of 2.08 as of Dec 31, 2023.
- The current ratio above 1 indicates that the company has more current assets than current liabilities, suggesting a strong ability to meet short-term obligations.

2. Quick Ratio:
- The quick ratio, or acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets.
- Tennant Co.'s quick ratio has ranged from 1.20 to 1.44 over the past five years, with a quick ratio of 1.44 as of Dec 31, 2023.
- The quick ratio above 1 signifies that the company can cover its short-term liabilities without relying on selling inventory, indicating a good liquidity position.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity ratio, measuring the company's ability to cover its current liabilities with cash and cash equivalents.
- Tennant Co.'s cash ratio has varied from 0.39 to 0.65 over the past five years, with a cash ratio of 0.53 as of Dec 31, 2023.
- The cash ratio above 0.5 indicates that Tennant Co. holds sufficient cash to meet its immediate obligations without relying on converting other current assets into cash.

Overall, Tennant Co. has demonstrated consistent liquidity over the past five years, as indicated by its current, quick, and cash ratios. The company appears to have a strong ability to meet its short-term financial commitments, which is essential for maintaining financial stability and operational continuity.

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Additional liquidity measure

The cash conversion cycle of Tennant Co. has shown some fluctuations over the past five years. In 2023, the cash conversion cycle decreased to 105.56 days from 127.82 days in 2022, indicating an improvement in the company's efficiency in managing its working capital. This decrease may suggest that Tennant Co. is able to convert its investments in inventory and accounts receivable into cash more quickly.

Comparing the cash conversion cycle to previous years, 2021 also saw a lower cash conversion cycle of 92.60 days, indicating a similar trend of improved efficiency in working capital management. In contrast, 2020 and 2019 had slightly higher cash conversion cycles of 86.06 days and 101.89 days, respectively.

Overall, Tennant Co.'s cash conversion cycle has shown variability over the years, but the recent decrease in 2023 suggests a positive trend towards a more efficient conversion of investments into cash. Further analysis of the company's operational and financial activities may provide insights into the factors contributing to these fluctuations.