Trane Technologies plc (TT)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.13 | 1.12 | 1.36 | 1.59 | 1.77 |
| Quick ratio | 0.67 | 0.70 | 0.97 | 1.27 | 0.67 |
| Cash ratio | 0.18 | 0.21 | 0.45 | 0.76 | 0.25 |
Trane Technologies plc's liquidity ratios have shown a mixed trend over the past five years. The current ratio, which measures the company's ability to cover short-term liabilities with its current assets, has been decreasing from 1.59 in 2020 to 1.13 in 2023. This downward trend may indicate a potential strain on the company's liquidity position.
The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also been declining over the years from 1.32 in 2020 to 0.78 in 2023. This suggests that the company may have a lower ability to meet its short-term obligations without relying on inventory liquidation.
Furthermore, the cash ratio, which indicates the proportion of current liabilities that could be covered by the company's cash and cash equivalents, has experienced a notable decrease from 0.81 in 2020 to 0.29 in 2023. This sharp decline in the cash ratio could signal potential challenges in meeting immediate financial obligations solely from cash reserves.
Overall, based on the decreasing trend in all three liquidity ratios, Trane Technologies plc's liquidity position appears to have weakened over the years. Investors and stakeholders may need to closely monitor the company's liquidity management strategies to ensure its ability to meet short-term financial commitments.
See also:
Trane Technologies plc Liquidity Ratios
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 76.68 | 51.18 | 27.40 | 54.96 | 46.25 |
Trane Technologies plc's cash conversion cycle has shown some fluctuations over the past five years. The company's cash conversion cycle increased from 58.44 days in 2019 to 60.22 days in 2022 before reaching a peak of 64.97 days in 2023. This indicates that the company took longer to convert its investments in inventory and accounts receivable into cash in 2023 compared to previous years.
A longer cash conversion cycle can indicate inefficiencies in managing inventory, collecting receivables, or paying suppliers, which may tie up more of the company's cash resources. It could also suggest potential challenges in balancing the timing of payments and receipts, impacting the company's liquidity and working capital management.
Overall, Trane Technologies plc may want to focus on improving its inventory turnover, accelerating accounts receivable collection, and optimizing its payment cycles to shorten its cash conversion cycle and enhance its cash flow efficiency.