Xylem Inc (XYL)

Xylem Inc's liquidity ratios have shown varying trends over the years. Starting with the current ratio, which indicates the company's ability to cover its short-term liabilities with its current assets, we see an increase from 1.80 in 2020 to 2.27 in 2021, suggesting an improvement in the company's liquidity position. However, the ratio declined in the following years, reaching 1.75 by the end of 2024.

Moving on to the quick ratio, which provides a more stringent measure of liquidity by excluding inventories from current assets, we observe a similar pattern. The quick ratio improved from 1.43 in 2020 to 1.65 in 2021 before declining to 1.19 by the end of 2024. This indicates that Xylem may have become less able to meet its short-term obligations without relying on inventory.

Lastly, the cash ratio, which measures the company's ability to cover its current liabilities with cash and cash equivalents, has also shown a decreasing trend over the years. Starting at 0.96 in 2020, the ratio decreased to 0.48 by the end of 2024, indicating a reduction in Xylem's immediate ability to settle its short-term debts with cash on hand.

In conclusion, while Xylem Inc demonstrated improved liquidity in 2021, the subsequent years saw a decline in the company's ability to meet its short-term obligations without relying on inventory or cash. This trend suggests a potential need for Xylem to closely monitor and manage its liquidity position in the future.

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Additional liquidity measure

The cash conversion cycle of Xylem Inc has shown a somewhat fluctuating trend over the past five years. In December 2020, the cash conversion cycle was 67.77 days, which then increased to 73.87 days by December 2021. Continuing this upward trend, the cycle extended to 80.51 days by December 2022, and further to 84.07 days by December 2023, indicating a delay in the company's cash conversion process.

However, there was a notable improvement by December 2024, with the cash conversion cycle reducing to 70.42 days. This decrease may suggest that Xylem Inc implemented more efficient working capital management practices, leading to a quicker conversion of its investments in inventory and receivables into cash.

Overall, it is important for Xylem Inc to continue monitoring and managing its cash conversion cycle effectively to ensure optimal liquidity and operational efficiency in the future.