Waters Corporation (WAT)

Waters Corp.'s liquidity ratios show a generally healthy liquidity position over the past five years. The current ratio has remained relatively stable, ranging from 1.74 to 2.39, with the latest ratio standing at 2.22 as of December 31, 2023. This indicates that the company has more than enough current assets to cover its short-term obligations.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also reflects a strong liquidity position. The quick ratio has ranged from 1.36 to 1.87 over the past five years, with a value of 1.57 as of December 31, 2023. This suggests that Waters Corp. is able to meet its short-term obligations without relying on selling inventory.

The cash ratio, which specifically focuses on the ability to cover short-term obligations with cash and cash equivalents, has fluctuated over the years but generally remained above 0.65. As of December 31, 2023, the cash ratio stands at 0.68, indicating that Waters Corp. has a moderate ability to cover its short-term liabilities with cash on hand.

Overall, based on these liquidity ratios, Waters Corp. appears to have a strong liquidity position, with ample current assets to meet its short-term obligations and a reasonable level of cash reserves for immediate needs.

---

Additional liquidity measure

The cash conversion cycle of Waters Corp. has shown fluctuating trends over the past five years. From 2019 to 2021, the company managed to improve its cash conversion cycle from 187.21 days to 162.10 days, indicating a more efficient management of its working capital. However, in 2022 and 2023, the cash conversion cycle increased to 194.76 days and 218.47 days, respectively.

A longer cash conversion cycle suggests that the company takes more time to convert its investments in inventory and other resources into cash inflows from sales. This may indicate possible inefficiencies in managing inventory, collecting receivables, or delaying payments to suppliers.

The increasing trend in the cash conversion cycle over the past two years may raise concerns about the company's liquidity and operational efficiency. It could be beneficial for Waters Corp. to focus on optimizing its inventory management, streamlining its accounts receivable collection process, and negotiating favorable payment terms with suppliers to shorten its cash conversion cycle and improve cash flow.

Overall, a company's cash conversion cycle is a vital indicator of its operational effectiveness and financial health, and close monitoring and management of this metric are crucial for sustaining long-term business success.