United Rentals Inc (URI)

The liquidity ratios of United Rentals, Inc. indicate its ability to meet short-term obligations and efficiently convert assets into cash. The current ratio, which measures the company's ability to pay its short-term liabilities with its short-term assets, has shown varying trends over the past five years, ranging from 0.81 to 1.11. A ratio above 1.0 is generally considered healthy, although a consistently high ratio may indicate an inefficient use of resources.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also shown fluctuations, ranging from 0.75 to 1.02 over the same period. This ratio gives a clearer picture of the immediate ability to cover short-term obligations and is typically expected to be higher than the current ratio.

The cash ratio, which assesses the company's ability to cover short-term liabilities with its most liquid assets, has also varied, with values ranging from 0.09 to 0.31. This ratio highlights the company's reliance on cash and cash equivalents to meet its short-term obligations, and a higher ratio is generally preferred as it indicates a stronger ability to cover liabilities without relying on the sale of inventory or receivables.

Overall, the liquidity ratios of United Rentals, Inc. show fluctuating trends over the past five years, indicating potential variability in its short-term financial strength. The downward trend in these ratios might suggest a need for the company to focus on managing its short-term assets and liabilities effectively to ensure its ability to meet financial obligations.

---

See also:

United Rentals Inc Liquidity Ratios

---

Additional liquidity measure

The cash conversion cycle (CCC) measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A lower CCC indicates more efficient management of working capital.

United Rentals, Inc.'s CCC has varied significantly in recent years. In 2023, the company's CCC stood at 15.38 days, indicating an increase from the previous year. This suggests that the company took longer to convert its investments in inventory and resources into cash flows from sales.

The negative CCC in 2022 is an interesting anomaly that may suggest the company managed to collect cash from customers before paying its suppliers, resulting in negative working capital required for operations. This may be due to specific timing of payments and collections.

In 2021, the CCC improved to 7.03 days, indicating efficient management of working capital. However, over the past five years, United Rentals, Inc. has seen fluctuations in its CCC, with higher values in 2020 and 2019 at 23.04 and 29.62 days, respectively.

The trend of increasing CCC from 2021 to 2023 may warrant further investigation into the company's working capital management policies and its ability to promptly convert inventory and receivables into cash.