AdvanSix Inc (ASIX)

AdvanSix Inc's liquidity ratios indicate its ability to meet short-term obligations and cover immediate financial needs. The current ratio, which measures the company's ability to pay off current liabilities with current assets, has shown a generally stable trend over the past five years, ranging from 1.00 in 2019 to 1.17 in 2023. A current ratio above 1 indicates that AdvanSix Inc has more current assets than current liabilities, suggesting a healthy liquidity position.

The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. AdvanSix Inc's quick ratio has ranged from 0.41 in 2019 to 0.65 in 2021, with the latest figure at 0.58 in 2023. This indicates that the company may have some difficulty in meeting its short-term obligations without relying on its inventory.

The cash ratio, which is the most stringent measure of liquidity as it only considers cash and cash equivalents to cover current liabilities, has improved over the years for AdvanSix Inc. The cash ratio has increased from 0.04 in 2019 to 0.11 in 2023, showing the company's enhanced ability to cover immediate liabilities with its cash resources.

In summary, AdvanSix Inc's liquidity ratios suggest that the company has maintained a generally healthy liquidity position over the years, with improvements in its ability to meet short-term obligations using both current assets and cash resources. However, the decreasing trend in the quick ratio warrants attention as it indicates a potential liquidity strain when excluding inventory from the calculation.

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Additional liquidity measure

The cash conversion cycle of AdvanSix Inc has fluctuated over the past five years. In 2023, the company's cash conversion cycle increased to 27.11 days from 21.93 days in 2022. This indicates that it took AdvanSix Inc longer to convert its investments in inventory and receivables into cash in 2023 compared to the previous year.

In 2021, the cash conversion cycle was 20.26 days, showing an improvement compared to 2022. However, in 2020, the cycle increased significantly to 39.21 days, indicating a delay in cash conversion. The best performance in the cash conversion cycle was in 2019, at 19.26 days, reflecting efficient management of inventory and receivables.

Overall, fluctuations in the cash conversion cycle suggest varying efficiencies in managing working capital components. A shorter cycle indicates that the company is able to generate cash quickly from its operating activities, while a longer cycle may indicate inefficiencies in managing inventory or collecting receivables. AdvanSix Inc should closely monitor its cash conversion cycle to ensure optimal management of working capital and cash flow.