Westlake Chemical Corporation (WLK)

Westlake Corporation's liquidity ratios for the past five years indicate the company's ability to meet its short-term obligations. The current ratio, which measures the company's ability to cover its current liabilities with its current assets, has shown some fluctuations over the years, ranging from a low of 2.21 in 2019 to a high of 2.60 in 2022. This ratio has averaged around 2.40 over the period, suggesting that Westlake has generally been able to comfortably meet its short-term obligations.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Westlake's quick ratio has remained relatively stable over the years, averaging around 1.72. This indicates that the company may have a slightly lower ability to cover its short-term liabilities without relying on inventory compared to its current assets.

The cash ratio, which measures the proportion of current liabilities that can be covered by cash and cash equivalents, has shown a rising trend over the years, from 0.62 in 2019 to 1.21 in 2023. This suggests that Westlake has been improving its ability to meet its short-term obligations with cash on hand, which is a positive indicator of liquidity.

Overall, Westlake Corporation's liquidity ratios demonstrate a generally healthy liquidity position, with the company consistently maintaining ratios above industry standards. However, it is important to monitor these ratios over time to ensure the company's ability to meet its short-term obligations remains strong.

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Additional liquidity measure

The cash conversion cycle for Westlake Corporation fluctuated over the past five years. In 2023, the company's cash conversion cycle was 72.90 days, slightly higher compared to the previous year at 72.05 days. However, it was lower than the cycle in 2021 and 2020, which were 81.16 days and 80.56 days respectively. The most efficient year in terms of cash conversion cycle was 2019, with a cycle of 71.22 days.

Overall, the cash conversion cycle of Westlake Corporation has shown relative stability over the five-year period, with some fluctuations. The company may need to further analyze the factors contributing to the variations in the cycle to optimize its working capital management and enhance operational efficiency.