Waste Management Inc (WM)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 0.76 | 0.90 | 0.81 | 0.75 | 1.00 |
| Quick ratio | 0.69 | 0.79 | 0.71 | 0.65 | 0.98 |
| Cash ratio | 0.10 | 0.11 | 0.08 | 0.03 | 0.24 |
Based on the provided data for Waste Management Inc's liquidity ratios:
1. Current Ratio:
- The current ratio measures the company's ability to pay its short-term obligations with its current assets.
- Waste Management Inc's current ratio declined from 1.00 in 2020 to 0.75 in 2021 before showing a slight improvement to 0.81 in 2022. However, it decreased again to 0.76 by the end of 2024.
- A current ratio below 1 indicates that the company may have difficulty meeting its short-term liabilities with its current assets.
2. Quick Ratio (Acid-Test Ratio):
- The quick ratio is a more stringent measure of liquidity as it excludes inventory from current assets.
- Waste Management Inc's quick ratio also decreased over the years from 0.98 in 2020 to 0.65 in 2021, with slight improvements in the subsequent years but still remaining below 1 at 0.69 in 2024.
- A quick ratio below 1 indicates that the company may have difficulty meeting its short-term liabilities without relying on selling inventory.
3. Cash Ratio:
- The cash ratio is the most conservative liquidity ratio, representing the company's ability to cover its short-term liabilities with cash and cash equivalents.
- Waste Management Inc's cash ratio decreased significantly from 0.24 in 2020 to just 0.03 in 2021, and then showed some recovery to 0.10 by the end of 2024.
- A low cash ratio may indicate a potential cash flow issue and the need for better management of liquidity.
Overall, based on the trend of these liquidity ratios for Waste Management Inc, there are indications of deteriorating liquidity position, especially with current and quick ratios consistently below 1. It may be essential for the company to improve its liquidity management strategies to ensure it can meet its short-term obligations effectively.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 19.03 | 15.50 | 11.80 | 19.40 | 33.10 |
The cash conversion cycle of Waste Management Inc has shown a decreasing trend over the past five years, indicating an improvement in the efficiency of its working capital management.
In December 2020, the cash conversion cycle was 33.10 days, which decreased to 19.40 days in December 2021, signaling a more rapid conversion of inventory into cash. This trend continued as the cash conversion cycle further decreased to 11.80 days in December 2022, reflecting better receivables collection and inventory turnover.
However, there was a slight increase in the cash conversion cycle to 15.50 days in December 2023, possibly suggesting a temporary slowdown in the conversion process. Nonetheless, the cycle improved again to 19.03 days by the end of December 2024.
Overall, Waste Management Inc has shown a positive trend in its cash conversion cycle, indicating effective management of its operating cycle and liquidity position over the last five years.