Trane Technologies plc (TT)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.21 | 1.13 | 1.12 | 1.36 | 1.59 |
| Quick ratio | 0.77 | 0.67 | 0.70 | 0.97 | 1.27 |
| Cash ratio | 0.26 | 0.18 | 0.21 | 0.45 | 0.76 |
Trane Technologies plc's liquidity ratios indicate a decline in short-term solvency from 2020 to 2024. The current ratio, measuring the firm's ability to cover its short-term obligations with current assets, decreased from 1.59 in 2020 to 1.21 in 2024. Similarly, the quick ratio, which provides a more stringent measure by excluding inventory from current assets, fell from 1.27 in 2020 to 0.77 in 2024.
The cash ratio, highlighting the company's ability to meet its obligations using only cash and cash equivalents, also exhibited a downward trend from 0.76 in 2020 to 0.26 in 2024. These declining trends indicate potential challenges in Trane Technologies plc's ability to swiftly cover its short-term liabilities with its most liquid assets, which may raise concerns about its overall liquidity position and ability to manage unexpected financial needs in the near term.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 39.80 | 76.68 | 51.18 | 27.40 | 54.96 |
Trane Technologies plc's cash conversion cycle has shown varying trends over the past five years. In 2020, the company's cash conversion cycle was 54.96 days, indicating that it took nearly 55 days for the company to convert its investments in inventory and other resources into cash.
Subsequently, in 2021, the cash conversion cycle decreased significantly to 27.40 days, reflecting an improvement in the company's efficiency in managing its working capital and converting its assets into cash.
Despite the improvement in 2021, the cash conversion cycle increased in 2022 to 51.18 days, before experiencing a substantial rise to 76.68 days in 2023. This increase suggests that Trane Technologies plc may have faced challenges in efficiently managing its working capital and converting its resources into cash during these periods.
However, in 2024, the cash conversion cycle decreased to 39.80 days, indicating that the company was able to enhance its working capital management and cash conversion efficiency compared to the previous year.
Overall, the fluctuation in Trane Technologies plc's cash conversion cycle over the five-year period highlights the importance of monitoring working capital management practices and efficiency in converting resources into cash to sustain and improve financial performance.