Xylem Inc (XYL)

Xylem Inc's liquidity ratios, namely the current ratio, quick ratio, and cash ratio, provide insights into the company's ability to meet its short-term obligations.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has shown some fluctuation over the past five years. In 2021, the current ratio was relatively high at 2.27, indicating a stronger ability to meet short-term obligations. However, it decreased to 1.76 in 2023, suggesting a slight reduction in liquidity compared to the previous year. Overall, the current ratio has remained above 1 in all years, reflecting a generally healthy liquidity position.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Xylem Inc's quick ratio has exhibited a similar trend to the current ratio, with some variability from year to year. The quick ratio decreased from 1.52 in 2020 to 1.30 in 2023, indicating a slight decrease in the company's ability to quickly cover its short-term liabilities with its most liquid assets.

The cash ratio, which specifically evaluates the company's ability to cover its short-term liabilities with cash and cash equivalents, has shown fluctuations but generally remained relatively stable over the years. The cash ratio was highest in 2021 at 1.08, indicating a strong ability to meet short-term obligations with cash on hand. However, it decreased to 0.57 in 2023, suggesting a lower cash coverage compared to the previous years.

Overall, Xylem Inc's liquidity ratios indicate that the company has maintained a generally healthy liquidity position over the years, with the ability to meet its short-term liabilities. However, the decreasing trend in some ratios in recent years may warrant further monitoring to ensure ongoing liquidity and financial stability.

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Additional liquidity measure

The cash conversion cycle of Xylem Inc has shown a gradual increase over the past five years, indicating a lengthening time period required to convert its investments in inventory and receivables into cash. This trend suggests that the company may be facing challenges in efficiently managing its working capital, potentially leading to increased holding costs and reduced liquidity. The company should focus on streamlining its operational processes, improving inventory turnover, and enhancing its receivables management to shorten the cash conversion cycle and enhance overall cash flow efficiency.