Asbury Automotive Group Inc (ABG)

Asbury Automotive Group Inc's liquidity ratios indicate the company's ability to meet its short-term obligations.

1. Current Ratio:
- The current ratio represents the ability of a company to meet its short-term liabilities with its short-term assets.
- Over the past five years, Asbury's current ratio has shown variability but has generally remained above 1, which indicates that the company has had sufficient current assets to cover its current liabilities.
- The current ratio improved from 2020 to 2022 reaching its peak at 1.85, indicating an increase in the company's short-term liquidity position. However, it declined in 2023 and 2024, which may suggest potential challenges in meeting short-term obligations in those years.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventories from current assets.
- Asbury's quick ratio has shown a similar trend as the current ratio, starting from a very low level in 2020 and gradually improving over the years.
- The company's quick ratio in 2022 reached 0.23, indicating an improvement in its ability to cover immediate liabilities with liquid assets. However, the quick ratio remained relatively low overall, suggesting a limited ability to cover short-term obligations without relying on inventory assets.

3. Cash Ratio:
- The cash ratio measures a company's ability to pay off its current liabilities using only its cash and cash equivalents.
- Like the quick ratio, Asbury's cash ratio has shown a similar trend of improvement over the years.
- The cash ratio increased from 2020 to 2022, indicating a strengthening ability to cover short-term liabilities with cash on hand. However, the cash ratio remains low, suggesting that the company may not have a significant amount of cash readily available to cover its short-term obligations.

In summary, while Asbury Automotive Group Inc has generally maintained current ratios above 1, suggesting a favorable liquidity position, the low quick and cash ratios indicate a reliance on non-liquid assets to meet short-term obligations. It may be prudent for the company to focus on improving its quick and cash positions to enhance its overall liquidity.

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Additional liquidity measure

The cash conversion cycle of Asbury Automotive Group Inc has exhibited fluctuations over the past five years. On December 31, 2020, the company's cash conversion cycle stood at 54.07 days, indicating that it took Asbury Automotive Group Inc 54.07 days, on average, to convert its investments in inventory and other resources into cash flows from sales.

Subsequently, on December 31, 2021, the cash conversion cycle decreased to 33.04 days, illustrating an improvement in the company's efficiency in managing its working capital. This reduction suggests that Asbury Automotive Group Inc was able to convert its resources into cash more quickly compared to the previous year.

By December 31, 2022, the cash conversion cycle further decreased to 28.39 days, demonstrating a continued enhancement in the company's working capital management practices. This reduction implies that Asbury Automotive Group Inc optimized its operations to generate cash more efficiently.

However, on December 31, 2023, the cash conversion cycle increased to 53.58 days, reversing the positive trend observed in the previous years. This rise indicates a potential slowdown in the company's ability to convert resources into cash, which may warrant further investigation into its operational performance.

In the most recent data available, as of December 31, 2024, the cash conversion cycle slightly declined to 50.72 days, still above the levels seen in the earlier years. This suggests that Asbury Automotive Group Inc may be facing challenges in maintaining the efficiency of its working capital management.

Overall, while there have been fluctuations in Asbury Automotive Group Inc's cash conversion cycle over the past five years, the company should focus on sustaining or improving its operational efficiency to ensure effective utilization of its resources and timely conversion into cash inflows.