Textron Inc (TXT)

Based on the provided data for Textron Inc, the liquidity ratios show a fluctuating trend over the years:

1. Current Ratio:
- The current ratio measures the company's ability to cover short-term obligations with its current assets.
- Textron Inc's current ratio has varied between 0.91 to 1.73 over the years, with the highest being in 2020 and the lowest in 2023 and 2024.
- A current ratio above 1 indicates that the company has more current assets than current liabilities, which is generally considered favorable for meeting short-term obligations.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent test of liquidity as it excludes inventory from current assets.
- Textron Inc's quick ratio has been decreasing from 0.66 in 2020 to 0.01 in 2024, indicating a significant decline in its ability to meet short-term obligations without relying on inventory.
- A quick ratio below 1 may raise concerns about the company's ability to pay off its current liabilities quickly.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity ratio, measuring the company's ability to cover current liabilities with its cash and cash equivalents.
- Textron Inc's cash ratio has shown a consistent decline from 0.66 in 2020 to 0.01 in 2024, indicating a decreasing ability to pay off short-term obligations with its cash holdings only.
- A low cash ratio may signal potential cash flow issues or a high reliance on other liquid assets to meet immediate obligations.

In summary, Textron Inc's liquidity ratios have shown a mixed performance, with the current ratio exhibiting more stability compared to the quick ratio and cash ratio, which have experienced significant declines over the years. It is essential for investors and stakeholders to closely monitor these ratios to assess the company's short-term financial health and liquidity position.

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Additional liquidity measure

The cash conversion cycle of Textron Inc has shown fluctuations over the past five years. As of December 31, 2020, the company had a cash conversion cycle of 1,215.40 days, indicating that it took over three years to convert resources into cash. By December 31, 2021, the cycle had improved to 1,137.30 days, suggesting a more efficient conversion of inventory and receivables into cash.

However, there was a reversal in the trend by December 31, 2022, with the cash conversion cycle increasing to 1,298.35 days. This lengthening of the cycle could signal challenges in managing working capital effectively. By December 31, 2023, the cycle decreased slightly to 1,237.96 days, but it remained relatively high compared to earlier periods.

Notably, by December 31, 2024, the cash conversion cycle significantly increased to 1,474.12 days, representing a considerable delay in converting investments in inventory and receivables into cash. This prolonged cycle may indicate potential inefficiencies in the company's operating cycle and working capital management.

In conclusion, Textron Inc's cash conversion cycle has experienced fluctuations, with periods of improvement followed by setbacks. The company may benefit from focusing on optimizing its working capital processes to enhance efficiency and cash flow management.