Targa Resources Inc (TRGP)

The liquidity ratios of Targa Resources Inc, as evidenced by the current ratio, quick ratio, and cash ratio, indicate a concerning trend over the past five years.

The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has decreased from 0.82 in 2020 to 0.72 in 2024. This declining trend suggests that Targa Resources may be facing challenges in meeting its short-term financial obligations.

Similarly, the quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has shown a decline from 0.18 in 2020 to 0.05 in 2024. This significant decrease indicates a potential difficulty for Targa Resources in meeting its immediate liabilities without relying on inventory.

The cash ratio, which specifically evaluates a company's ability to cover its short-term liabilities using only cash and cash equivalents, has also demonstrated a downward trend from 0.18 in 2020 to 0.05 in 2024. This indicates a decreasing ability of Targa Resources to meet its short-term obligations solely with its available cash resources.

Overall, the declining liquidity ratios of Targa Resources Inc over the past five years raise concerns about the company's ability to efficiently manage its short-term financial commitments and may signal the need for improved liquidity management strategies.

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Additional liquidity measure

The cash conversion cycle of Targa Resources Inc has shown fluctuations over the past five years. As of December 31, 2020, the company's cash conversion cycle was 11.10 days, indicating that it took Targa approximately 11 days to convert its investments in inventory and receivables into cash.

By December 31, 2021, Targa had significantly improved its cash conversion cycle to 3.83 days, suggesting a more efficient management of its working capital. However, this efficiency decreased by December 31, 2022, with the cash conversion cycle increasing to 8.00 days.

Subsequently, by December 31, 2023, Targa experienced a further increase in its cash conversion cycle to 11.29 days, reflecting a potential delay in cash generation from its operating activities. By December 31, 2024, the cash conversion cycle improved slightly to 10.06 days, yet remained higher compared to the levels observed in 2021 and 2022.

Overall, the trend in Targa Resources Inc's cash conversion cycle indicates fluctuations in the efficiency of converting its working capital into cash over the years, highlighting the importance of effective working capital management for the company's financial performance.