Alamo Group Inc (ALG)

The liquidity ratios of Alamo Group Inc. provide insight into the company's ability to meet its short-term obligations.

1. Current ratio: Alamo Group Inc. has maintained a consistently high current ratio over the past five years, ranging from 3.18 to 3.82. This indicates that the company has strong short-term liquidity, with more than enough current assets to cover current liabilities. The current ratio has shown minor fluctuations, but overall, it suggests a healthy liquidity position for the company.

2. Quick ratio: The quick ratio also reflects Alamo Group Inc.'s ability to meet its short-term obligations, excluding inventory from current assets. The values have varied between 1.51 and 1.99 over the past five years. Although the quick ratio is slightly lower than the current ratio, it still demonstrates the company's ability to cover immediate liabilities without relying on selling inventory.

3. Cash ratio: The cash ratio measures the company's ability to cover its current liabilities with cash and cash equivalents alone. Alamo Group Inc. has maintained a cash ratio between 0.27 and 0.37 over the past five years. While the cash ratio has been lower compared to the current and quick ratios, it indicates that the company holds a sufficient level of cash to meet its short-term obligations.

Overall, the liquidity ratios suggest that Alamo Group Inc. has maintained a strong liquidity position over the years, with ample current assets to cover current liabilities. This implies that the company is well-positioned to meet its short-term financial commitments and unexpected expenses.

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Additional liquidity measure

The cash conversion cycle of Alamo Group Inc. has fluctuated over the past five years. In 2023, the company had a cash conversion cycle of 160.25 days, which increased from 158.66 days in 2022. This indicates that the company took longer to convert its investments in inventory into cash in 2023 compared to the previous year.

Looking back further, in 2021, the cash conversion cycle was 145.71 days, showing an improvement from 132.38 days in 2020. However, the cycle was longer in 2021 compared to 2020, indicating that the company took longer to collect cash from its receivables and convert it into cash in 2021.

In 2019, the cash conversion cycle was notably high at 161.90 days, reflecting that the company struggled with managing its working capital effectively that year.

Overall, the trend suggests some variability in the efficiency of Alamo Group Inc.'s cash conversion cycle over the past five years, with the company experiencing fluctuations in the time it takes to convert investments in inventory and receivables into cash. This indicates the need for further analysis and possibly improvement in the company's working capital management practices.