Textron Inc (TXT)
Liquidity ratios
| Dec 31, 2024 | Sep 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 | Dec 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 4.38 | 1.03 | 0.99 | 0.91 | 0.97 | 0.95 | 1.76 | 1.50 | 2.22 | 2.30 | 2.46 | 1.17 | 2.66 | 2.73 | 2.64 | 2.26 | 2.12 | 1.98 | 1.88 | 147.19 |
| Quick ratio | 0.06 | 0.01 | 0.02 | 0.48 | 0.01 | 0.01 | 0.02 | 0.53 | 0.02 | 0.51 | 0.59 | 0.61 | 0.65 | 0.06 | 0.61 | 0.66 | 0.04 | 0.04 | 0.04 | 24.60 |
| Cash ratio | 0.06 | 0.01 | 0.02 | 0.48 | 0.01 | 0.01 | 0.02 | 0.53 | 0.02 | 0.51 | 0.59 | 0.61 | 0.65 | 0.06 | 0.61 | 0.66 | 0.04 | 0.04 | 0.04 | 24.60 |
Based on the provided data, let's analyze the liquidity ratios of Textron Inc over the given period:
1. Current Ratio:
The current ratio measures the company's ability to cover its short-term obligations with its current assets. Textron Inc's current ratio fluctuated significantly over the period, starting at an extremely high level of 147.19 on December 31, 2019, but gradually declining to a low of 0.91 on December 31, 2023. However, it improved to 4.38 on December 31, 2024. Generally, a current ratio above 1 indicates that the company has more current assets than current liabilities, ensuring that it can meet its short-term obligations.
2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Textron Inc's quick ratio experienced substantial fluctuations over the period. It started at 24.60 on December 31, 2019, dropped to as low as 0.01 on September 30, 2023, and then rose to 0.06 on December 31, 2024. A quick ratio above 1 is generally considered healthy, indicating that the company can cover its short-term obligations without relying on selling inventory.
3. Cash Ratio:
The cash ratio is the most conservative measure of liquidity, focusing solely on the company's ability to cover its short-term liabilities with cash and cash equivalents. Textron Inc's cash ratio showed similar fluctuations to the quick ratio, ranging from 24.60 on December 31, 2019, to 0.06 on December 31, 2024. A cash ratio above 1 signifies that the company has enough cash to cover its short-term liabilities, providing a strong indication of financial stability.
In summary, Textron Inc's liquidity ratios varied significantly over the period, with some fluctuations indicating potential liquidity challenges. Monitoring these ratios is crucial for assessing the company's ability to meet its short-term obligations and manage its working capital effectively.
Additional liquidity measure
| Dec 31, 2024 | Sep 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 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 1,239.30 | 1,391.23 | 1,330.02 | 1,237.96 | 1,465.22 | 1,484.57 | 1,437.35 | 1,298.35 | 1,383.52 | 1,307.22 | 1,215.45 | 1,137.30 | 0.00 | 0.00 | 0.00 | 0.00 | 171.17 | 164.23 | 129.89 | 118.73 |
The cash conversion cycle of Textron Inc has displayed significant fluctuations over the analyzed period. Starting at around 118 days at the end of December 2019, the cycle increased to over 1,000 days by December 2021, signifying a substantial extension in the time it takes for the company to convert its inventory into cash.
The cycle reached its peak at 1,484 days by the end of June 2023 before showing slight improvements and stabilizing at around 1,300 days by the end of December 2024. Such extended cash conversion cycles may indicate issues with inventory management, slow collection of receivables, or inefficient payment of payables, impacting the company's liquidity and overall financial health.
Textron Inc may need to evaluate and streamline its working capital management processes to optimize its cash conversion cycle and ensure more efficient utilization of its resources. This analysis underscores the importance of closely monitoring and managing key operational metrics like the cash conversion cycle to enhance financial performance and sustainability.