Vontier Corp (VNT)

The liquidity ratios of Vontier Corporation show the company's ability to meet its short-term obligations and cover immediate expenses.

The current ratio, which measures the company's ability to pay its short-term liabilities with its current assets, has shown a declining trend from 2018 to 2022, with a slight increase in 2023. While a current ratio above 1 indicates the company has more current assets than current liabilities, the decreasing trend may indicate a potential liquidity concern in recent years, although the ratio remains above 1 in all periods.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Vontier Corporation's quick ratio has fluctuated over the years, with a slight downward trend from 2018 to 2023. The quick ratio being below 1 in most periods suggests that the company may have difficulty meeting its short-term obligations without relying on inventory sales.

The cash ratio, which is the most conservative liquidity ratio as it only considers cash and cash equivalents to cover current liabilities, has shown improvement over the last few years. The upward trend in the cash ratio indicates that Vontier Corporation has been holding more cash relative to its short-term obligations, enhancing its ability to meet immediate payment requirements.

Overall, while Vontier Corporation's liquidity ratios have displayed some volatility over the years, the company has generally maintained a reasonable ability to meet its short-term financial obligations. However, management should monitor these ratios closely to ensure continued liquidity and efficient working capital management.

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Additional liquidity measure

Vontier Corporation's cash conversion cycle has shown some variability over the past five years. In 2023, the company's cash conversion cycle was 43.27 days, which represents an increase from the previous year. This indicates that Vontier took longer to convert its investments in inventory into cash receipts from sales during this period.

Compared to 2021 and 2020, where the cash conversion cycle was 28.37 days and 28.16 days respectively, 2023 saw a notable lengthening of the cycle. This suggests potential challenges in managing working capital efficiently, which could impact the company's liquidity and overall financial health.

Furthermore, when looking at the trend over the past five years, Vontier's cash conversion cycle has exhibited fluctuations, with the cycle peaking in 2019 at 42.78 days before dipping in 2021 and 2020, only to rise again in 2023. This inconsistency may indicate varying effectiveness in managing inventory, receivables, and payables within the company's operations.

Overall, Vontier Corporation's cash conversion cycle analysis highlights the importance of closely monitoring working capital management practices to ensure optimal financial performance and liquidity in the long term.