Westlake Chemical Corporation (WLK)

Westlake Chemical Corporation's liquidity ratios indicate its ability to meet short-term obligations effectively. The current ratio, which measures the company's ability to pay off its current liabilities with current assets, has shown some fluctuation over the years but remained healthy, ranging from 2.25 to 2.80. This suggests that Westlake Chemical has a strong financial position in the short term.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. While Westlake Chemical Corporation's quick ratio decreased from 2.64 in 2020 to 1.61 in 2021, it showed improvement in subsequent years, reaching 2.44 in 2024. This indicates that the company has an adequate level of quick assets to cover its current liabilities, albeit with some variability.

The cash ratio, which is the most conservative liquidity measure as it considers only cash and cash equivalents to current liabilities, illustrates Westlake Chemical Corporation's ability to pay off its immediate obligations without relying on inventory or receivables. The company's cash ratio improved progressively from 0.81 in 2021 to 1.77 in 2024, suggesting a stronger ability to meet short-term obligations solely through cash reserves.

Overall, the liquidity ratios of Westlake Chemical Corporation demonstrate a generally healthy liquidity position throughout the years, providing assurance of the company's ability to manage its short-term financial commitments effectively. It is important for the company to maintain a balanced liquidity position to ensure continued operational stability and financial health.

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Additional liquidity measure

Westlake Chemical Corporation's cash conversion cycle has shown fluctuations over the years based on the provided data. As of December 31, 2020, the cash conversion cycle was 80.56 days, and it slightly increased to 81.16 days by December 31, 2021. However, in the following years, there was a downward trend in the cash conversion cycle with a decrease to 72.05 days by December 31, 2022, and further dropping to 72.90 days by December 31, 2023. By the end of December 31, 2024, the cash conversion cycle increased slightly to 74.90 days.

Overall, the decreasing trend in the cash conversion cycle from 2021 to 2023 indicates an improvement in the efficiency of Westlake Chemical Corporation in converting its investments in raw materials and other inputs into cash receipts, thereby reducing the cycle time. However, the slight increase in the cash conversion cycle in 2024 suggests a potential slowdown in this efficiency. Monitoring this ratio closely is crucial for the company's liquidity management and operational performance assessment.