Travel + Leisure Co (TNL)

The liquidity ratios of Travel + Leisure Co indicate its ability to meet short-term obligations and manage its current liabilities. The current ratio, which compares current assets to current liabilities, decreased from 3.72 in December 2020 to 1.46 in December 2021, suggesting a decline in the company's ability to cover its short-term liabilities with its current assets. However, the ratio improved slightly to 1.59 in December 2022 and then fell to 1.28 in December 2023 before significantly increasing to 2.80 in December 2024, which may indicate improved liquidity in the most recent period.

The quick ratio, which excludes inventory from current assets in the calculation, also decreased substantially from 1.71 in December 2020 to 0.34 in December 2021, indicating a potential liquidity issue. The quick ratio continued to remain low at 0.50 in December 2022, 0.26 in December 2023, before slightly increasing to 0.35 in December 2024. This suggests that the company may have challenges in quickly converting its most liquid assets into cash to meet its short-term obligations.

The cash ratio, which specifically measures a company's ability to cover its current liabilities with its cash and cash equivalents, mirrored the trend of the quick ratio, revealing a decline from 1.71 in December 2020 to 0.34 in December 2021. The ratio remained consistent at 0.50 in December 2022 and 0.35 in December 2024, indicating that Travel + Leisure Co may have limited cash reserves to cover its short-term liabilities in the specified periods.

Overall, the downward trend in the quick ratio and cash ratio, along with fluctuations in the current ratio, suggest that Travel + Leisure Co faced liquidity challenges in some periods but improved its liquidity position by the end of December 2024, as indicated by the significant increase in the current ratio. Investors and stakeholders should monitor these ratios to assess the company's ability to manage short-term financial obligations effectively.

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Additional liquidity measure

The cash conversion cycle of Travel + Leisure Co has shown fluctuations over the years. As of December 31, 2020, the company's cash conversion cycle was 336.29 days, indicating it took approximately 336 days to convert its investments in inventory and other resources into cash inflows from sales. This number increased to 346.21 days by December 31, 2021, suggesting a delay in the conversion process.

However, there was a significant improvement in efficiency by December 31, 2022, with the cash conversion cycle declining to 270.29 days. This reduction indicates that the company was able to streamline its operations and convert its investments into cash at a faster pace. The trend continued positively in the following years, reaching 244.84 days by December 31, 2023, and remaining relatively stable at 245.80 days by December 31, 2024.

Overall, the decreasing trend in the cash conversion cycle from 2020 to 2024 indicates that Travel + Leisure Co has made improvements in managing its working capital and converting its assets into cash more efficiently over time. This trend suggests a positive development in the company's liquidity management and operational performance.