Westinghouse Air Brake Technologies Corp (WAB)

Westinghouse Air Brake Technologies Corp's liquidity ratios have shown fluctuations over the past five years.

The current ratio, which measures the company's ability to cover its short-term liabilities with its short-term assets, has been slightly decreasing from 1.32 in 2021 to 1.20 in 2023. Although the current ratio has generally been above 1, indicating that the company can meet its current obligations, the decreasing trend suggests a slight weakening in short-term liquidity.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Westinghouse Air Brake Technologies Corp's quick ratio has followed a similar pattern to the current ratio, decreasing from 0.74 in 2021 to 0.63 in 2023. A quick ratio below 1 may indicate potential difficulties in meeting immediate obligations without relying on the sale of inventory.

The cash ratio, which is the most conservative liquidity measure, has fluctuated within a narrower range compared to the current and quick ratios. Although the cash ratio has generally remained below 0.3, indicating that the company holds a relatively low level of cash compared to its current liabilities, the consistency of the ratio over the years suggests that Westinghouse Air Brake Technologies Corp may have a stable cash position relative to its short-term obligations.

Overall, while Westinghouse Air Brake Technologies Corp has maintained liquidity ratios that generally indicate the ability to meet short-term obligations, the decreasing trend in both the current and quick ratios may warrant further monitoring to ensure the company's liquidity remains adequate.

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Additional liquidity measure

Westinghouse Air Brake Technologies Corp's cash conversion cycle has shown some fluctuations over the past five years. The company's cash conversion cycle increased from 112.01 days in 2019 to 119.57 days in 2023. This indicates that, on average, it took the company approximately 119.57 days to convert its investments in inventory and other resources into cash generated from sales during the most recent fiscal year.

Furthermore, the company's cash conversion cycle was relatively stable between 2021 and 2022, ranging from 112.26 days to 114.24 days. However, there was a noticeable increase to 117.58 days in 2020.

A longer cash conversion cycle suggests that the company may be taking longer to collect payments from customers, manage its inventory, or pay its suppliers, which could potentially impact its liquidity and working capital management. It may be beneficial for Westinghouse Air Brake Technologies Corp to further analyze the components affecting its cash conversion cycle to identify areas where improvement can be made to optimize its cash flow efficiency.