Waters Corporation (WAT)

Waters Corporation has shown a favorable trend in its liquidity ratios over the years. The current ratio has increased steadily from 1.74 in 2020 to 2.11 in 2024. This indicates that the company's current assets are more than sufficient to cover its current liabilities, providing a cushion for short-term obligations.

Similarly, the quick ratio has also shown an upward trend, starting at 1.26 in 2020 and reaching 1.34 in 2024. This ratio, which excludes inventory from current assets, provides a more conservative measure of liquidity and shows that the company has a strong ability to meet its short-term obligations even without relying on inventory.

Lastly, the cash ratio, which measures the company's ability to cover its current liabilities with cash and cash equivalents, has fluctuated but still remained above 0.4 over the years. This indicates that Waters Corporation has a comfortable level of cash on hand to meet its immediate financial obligations.

Overall, the liquidity ratios of Waters Corporation suggest that the company has maintained a strong liquidity position and is well-equipped to meet its short-term financial commitments.

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Additional liquidity measure

The cash conversion cycle of Waters Corporation has shown fluctuations over the past five years. As of December 31, 2020, the company's cash conversion cycle stood at 142.76 days, indicating the average number of days it takes for the company to convert its investment in raw materials into cash receipts from sales.

Subsequently, the cash conversion cycle decreased to 133.07 days by December 31, 2021, suggesting an improvement in the efficiency of the company's working capital management. However, the cycle then increased significantly to 158.36 days by December 31, 2022, and further to 166.09 days by December 31, 2023, indicating a potential delay in converting inventory and accounts receivable into cash.

Fortunately, by December 31, 2024, the cash conversion cycle decreased to 143.77 days, suggesting a positive trend in managing working capital efficiency. It is essential for Waters Corporation to continue monitoring and optimizing its cash conversion cycle to ensure effective management of cash flow and maintain liquidity levels.