Whirlpool Corporation (WHR)

The current ratio measures the company's ability to meet its short-term obligations with its current assets. A current ratio above 1 indicates that a company has more current assets than current liabilities. Over the past five years, Whirlpool Corp.'s current ratio has fluctuated, with the ratio being relatively strong in 2021 at 1.14 before decreasing to 0.89 in 2023. This downward trend could signal potential liquidity challenges, as the company may struggle to cover its short-term liabilities with its current assets.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. A quick ratio of 1 or higher is generally considered healthy. Whirlpool Corp.'s quick ratio has also varied over the years, with the ratio being highest in 2021 at 0.82 and lowest in 2023 at 0.55. The declining trend in the quick ratio may indicate a decreased ability to cover immediate obligations without relying on inventory, which could be a concern for the company's liquidity position.

The cash ratio specifically measures a company's ability to cover its current liabilities with its cash and cash equivalents. A cash ratio above 0.20 is typically viewed as sufficient. Whirlpool Corp.'s cash ratio has ranged from 0.33 to 0.46 over the past five years, with the ratio peaking in 2021. The company's cash ratio in 2023 stands at 0.33, the lowest level among the periods analyzed. This may suggest that Whirlpool Corp. has a relatively lower amount of cash on hand to meet its short-term obligations.

In summary, the liquidity ratios of Whirlpool Corp. have shown variability over the past five years, with a generally declining trend in the current ratio, quick ratio, and cash ratio in the most recent period (2023). This could be indicative of potential liquidity challenges that the company may need to address to ensure its financial stability and ability to meet its short-term obligations.

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Additional liquidity measure

The cash conversion cycle measures how efficiently a company manages its working capital by evaluating the time it takes to convert its investments in inventory and other resources into cash flows from sales.

In the case of Whirlpool Corp., we observe the following trends in the cash conversion cycle over the past five years:

1. Dec 31, 2023: A negative cash conversion cycle of -1.59 days indicates that Whirlpool is able to convert its inventory into cash and collect payments from customers before paying its suppliers. This efficiency suggests effective management of working capital.

2. Dec 31, 2022: A cash conversion cycle of 0.56 days shows a slight increase compared to the previous year but still reflects the company's ability to quickly convert resources into cash, albeit at a slower pace.

3. Dec 31, 2021: The cash conversion cycle further decreased to -4.52 days, indicating a significant improvement in working capital efficiency. Whirlpool managed to reduce the time it takes to convert resources into cash, reflecting effective inventory and accounts receivable management.

4. Dec 31, 2020: The cash conversion cycle remained negative at -3.58 days, suggesting that Whirlpool continued its efficient working capital management practices, although the efficiency declined slightly compared to the previous year.

5. Dec 31, 2019: With a cash conversion cycle of -6.30 days, Whirlpool demonstrated a strong efficiency in working capital management, converting resources into cash at a faster rate compared to the following years.

Overall, Whirlpool Corp. has shown a consistent trend of maintaining a negative cash conversion cycle over the years, indicating effective management of working capital by efficiently converting investments in inventory into cash flows from sales and managing payments to suppliers and collection from customers.