XPO Logistics Inc (XPO)

Based on the provided data, we can analyze the liquidity ratios of XPO Inc over the past five years.

1. Current Ratio:
The current ratio measures the company's ability to meet its short-term obligations with its current assets. XPO Inc's current ratio has been relatively stable over the years, ranging from 1.00 to 1.08. A current ratio of 1.00 indicates that the company's current assets are equal to its current liabilities. Generally, a current ratio above 1.00 is considered healthy, suggesting that XPO Inc has sufficient current assets to cover its short-term liabilities.

2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, is a more stringent measure of liquidity as it excludes inventory from current assets. XPO Inc's quick ratio has also been consistent over the years, ranging from 1.00 to 1.07. A quick ratio of 1.00 indicates that the company's most liquid assets can cover its current liabilities, excluding inventory. Similar to the current ratio, a quick ratio above 1.00 is considered adequate for most industries.

3. Cash Ratio:
The cash ratio is the most conservative liquidity ratio, measuring the company's ability to cover short-term liabilities with its cash and cash equivalents alone. XPO Inc's cash ratio has varied significantly over the years, from 0.22 to 0.48. A cash ratio of 0.39 in the most recent year indicates that the company's cash and cash equivalents are sufficient to cover only 39% of its current liabilities. While a higher cash ratio is generally preferred, a lower cash ratio may suggest that XPO Inc relies on sources other than cash to meet its short-term obligations.

In summary, XPO Inc's liquidity ratios have shown relative stability over the past five years, with the current and quick ratios indicating the company's ability to meet its short-term obligations comfortably. However, the fluctuating cash ratio suggests that XPO Inc's reliance on cash and cash equivalents to cover short-term liabilities has varied significantly. This analysis highlights the importance of considering multiple liquidity ratios to assess a company's overall liquidity position.

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Additional liquidity measure

The cash conversion cycle of XPO Inc has shown significant fluctuations over the past five years. In 2019, the company had a relatively short cash conversion cycle of 3.95 days, indicating its efficiency in converting inventory and receivables into cash. However, in 2020, the cash conversion cycle increased to 6.48 days, suggesting a slower conversion process.

In 2021, the cash conversion cycle further increased to 14.70 days, indicating that XPO Inc took longer to convert its resources into cash. This significant rise may be a cause for concern as it could point to inefficiencies in managing inventory and collecting receivables.

However, the company made a significant improvement in 2022, reducing the cash conversion cycle to 6.66 days, a positive sign of efficiency in managing working capital. Interestingly, in 2023, XPO Inc managed to further improve its cash conversion cycle to -64.47 days, indicating that the company is operating with a negative cash cycle, essentially meaning that it is able to collect cash from customers before paying its suppliers and other obligations.

Overall, the trend in XPO Inc's cash conversion cycle shows variability over the years, with the most recent data reflecting an exceptional operating efficiency. However, management should monitor the cycle closely to ensure optimal working capital management and sustainable operations.