CSW Industrials, Inc. (CSW)

The liquidity ratios of CSW Industrials, Inc. over the provided period indicate a generally stable liquidity position with some notable fluctuations across the different measures.

Current Ratio:
The current ratio, which compares current assets to current liabilities, demonstrates a consistent trend of high liquidity, starting at 3.05 as of September 30, 2020, and gradually declining to a low of 2.55 by December 31, 2021. From this point onward, the ratio remains relatively stable, generally hovering around 2.70 to 3.00, indicating the company's ability to meet short-term obligations with liquid assets. A notable upward trend appears toward the end of the period, reaching 4.18 as of December 31, 2024, suggesting an increase in current assets relative to current liabilities, which could reflect improved liquidity or asset accumulation.

Quick Ratio:
The quick ratio, reflecting the company's most liquid assets excluding inventories, similarly shows an overall positive liquidity position. It begins at 2.04 in September 2020 and largely hovers above 1.0, reaching as high as 2.56 on September 30, 2024. The ratio experienced some declines, such as dropping to 1.09 in December 2021, but recovers afterward, indicating consistent availability of quick assets to cover immediate liabilities. The increase to 2.61 in June 2025 signifies enhanced liquidity relative to short-term obligations.

Cash Ratio:
The cash ratio, representing cash and cash equivalents against current liabilities, remains the most conservative liquidity measure. It starts at 0.82 in September 2020, with significant declines observed, falling below 0.20 by March 2021 through early 2022, implying limited cash reserves relative to current liabilities. However, notable fluctuations occur later, with the ratio declining to very low levels (around 0.12 to 0.15) through much of 2022 and into early 2023. An unusually sharp increase occurs at the end of 2024, reaching 1.59, which indicates a substantial build-up of cash assets, potentially through asset sales, revenue growth, or other liquidity-enhancing activities. Nevertheless, in the subsequent quarters, the cash ratio drops back to 0.24 by June 2025.

Overall, CSW Industrials’ liquidity ratios suggest a company maintaining a comfortably high level of liquidity in terms of current and quick assets, with the cash position demonstrating variability, at times reflecting high cash reserves and at other times emphasizing a reliance on non-cash current assets. The overall trend points towards sound liquidity management, with periods of increased cash holdings signaling strategic liquidity accumulation.

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Additional liquidity measure

The analysis of CSW Industrials, Inc.'s cash conversion cycle (CCC) over the specified period reveals a pattern of fluctuation with a general trend towards reduction and subsequent stabilization at certain levels. Starting with a CCC of approximately 123.70 days as of September 30, 2020, the cycle increased significantly to 203.91 days by December 31, 2020. This upward movement indicates a lengthening in the time it takes the company to convert its investments in inventory and receivables into cash, which may have been influenced by operational or market factors.

Throughout 2021, the CCC exhibited some variability, decreasing to 157.26 days by September 30, then fluctuating within the range of approximately 147.93 days to 171.80 days through the subsequent quarters. Notably, there was a slight upward trend toward the end of 2021 and into early 2022, with the CCC peaking at 180.72 days as of June 30, 2022.

In 2022, the CCC remained elevated, ranging between approximately 166.48 days and 180.72 days, suggesting a period of operating cycle stabilization with relatively extended cash conversion periods. During this time, the company seemed to maintain a longer cycle, which could reflect extended inventory holding times or slower receivables collections.

A decline is observed starting in late 2022 and into 2023, with the CCC decreasing to around 139.60 days by December 31, 2023. This reduction indicates a trend towards a more efficient cash conversion process, possibly due to operational improvements, tighter receivables management, or inventory handling.

In 2024, the CCC displayed some variability, initially rising to approximately 171.09 days by March 31 but subsequently decreasing again to approximately 146.68 days as of June 30, 2024. A slight increase was noted by September 30, 2024, reaching 154.22 days, with a further rise to 164.37 days by December 31, 2024. The data through early 2025 shows the CCC continuing its upward trend, reaching approximately 171.00 days by March 31, 2025, and further extending to about 180.14 days by June 30, 2025.

Overall, the company's cash conversion cycle demonstrates periods of both elongation and contraction, with notable improvements in late 2023 and mid-2024, suggesting increased operational efficiency during those intervals. However, the cyclical nature of the CCC indicates potential variations in inventory and receivables management strategies, industry demand cycles, or supply chain considerations that influence the company's ability to convert its investments into cash promptly. The trend towards lengthening again in the most recent periods warrants ongoing monitoring for signs of operational or market shifts affecting liquidity and working capital management.