Trane Technologies plc (TT)
Liquidity ratios
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 1.21 | 1.22 | 1.17 | 1.13 | 1.13 | 1.29 | 1.19 | 1.26 | 1.12 | 1.14 | 1.09 | 1.31 | 1.36 | 1.62 | 1.58 | 1.59 | 1.59 | 1.67 | 1.66 | 1.55 |
| Quick ratio | 0.77 | 0.80 | 0.72 | 0.62 | 0.67 | 0.79 | 0.69 | 0.68 | 0.70 | 0.71 | 0.68 | 0.82 | 0.97 | 1.20 | 1.21 | 1.20 | 1.27 | 1.32 | 1.22 | 1.12 |
| Cash ratio | 0.26 | 0.29 | 0.20 | 0.14 | 0.18 | 0.18 | 0.12 | 0.14 | 0.21 | 0.19 | 0.19 | 0.29 | 0.45 | 0.63 | 0.65 | 0.68 | 0.76 | 0.76 | 0.62 | 0.62 |
Trane Technologies plc's liquidity ratios have shown some fluctuations over the years. The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has generally been above 1, indicating a healthy liquidity position. However, there was a slight decline in the current ratio towards the end of 2024, which could signify potential challenges in meeting short-term obligations.
The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also displayed a declining trend over the years. This decreasing trend raises concerns about the company's ability to quickly meet its short-term obligations without relying on inventory, as the ratio fell below 1 towards the end of 2024.
The cash ratio, which provides insight into the company's ability to cover its current liabilities with its most liquid assets, has shown a significant decline over the years. This decreasing trend indicates that Trane Technologies plc may be less capable of meeting its short-term obligations solely with cash and cash equivalents, suggesting a potential strain on liquidity.
Overall, the liquidity ratios of Trane Technologies plc indicate a mixed picture, with a generally healthy current ratio but declining quick and cash ratios, signaling potential liquidity challenges that may need to be monitored and managed in the future.
See also:
Additional liquidity measure
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 39.80 | 50.72 | 69.22 | 98.29 | 76.68 | 76.90 | 90.38 | 106.60 | 51.18 | 57.49 | 55.97 | 54.78 | 27.40 | 57.34 | 55.70 | 55.00 | 54.96 | 57.13 | 59.92 | 50.03 |
The cash conversion cycle of Trane Technologies plc has shown fluctuations over the analyzed period. The cash conversion cycle represents the time it takes for a company to convert its investments in inventory into cash flows from sales.
From March 31, 2020, to December 31, 2022, the cycle remained relatively stable, ranging from about 50 to 60 days, indicating that the company was efficiently managing its working capital during this period.
However, there was a significant increase in the cash conversion cycle to 106.60 days as of March 31, 2023, suggesting potential challenges in managing inventory, collecting receivables, and paying payables efficiently. This prolonged cycle could lead to increased working capital requirements and potential liquidity constraints.
The cycle reduced in the subsequent quarters of 2023, reaching 69.22 days by June 30, 2024, and further declining to 39.80 days by December 31, 2024. These improvements indicate that the company has taken steps to streamline its working capital management, potentially by better inventory control, faster collections from customers, or more extended payment terms with suppliers.
Overall, an understanding of the cash conversion cycle is crucial for assessing a company's operational efficiency and financial health, as a shorter cycle typically indicates better management of working capital and liquidity. Keeping this cycle at an optimal level is essential for sustaining the company's financial stability and growth prospects.