CTS Corporation (CTS)

CTS Corporation has demonstrated a strong trend in liquidity ratios over the past five years. The current ratio, which measures the company's ability to cover short-term obligations with current assets, has shown consistent improvement, increasing from 2.22 in 2020 to 3.29 in 2023 before slightly decreasing to 2.50 in 2024. This indicates that CTS Corporation has a healthy level of current assets to meet its short-term liabilities.

Similarly, the quick ratio, also known as the acid-test ratio, reflects the company's ability to meet short-term obligations without relying on inventory. CTS Corporation's quick ratio has shown a positive trend, improving from 0.87 in 2020 to 1.70 in 2023, then declining to 0.97 in 2024. Despite the slight decrease in 2024, the quick ratio remains above 1, indicating that the company can cover its short-term liabilities with its most liquid assets.

The cash ratio, which is the most conservative liquidity measure as it only considers cash and cash equivalents, has also followed a similar pattern of improvement over the years. CTS Corporation's cash ratio increased from 0.87 in 2020 to 1.70 in 2023 before decreasing to 0.97 in 2024. This implies that the company has a sufficient amount of cash on hand to cover its immediate liabilities, although the decrease in 2024 may warrant further monitoring.

Overall, the liquidity ratios of CTS Corporation suggest that the company has maintained a solid financial position in terms of its ability to meet short-term obligations and manage liquidity effectively.

---

Additional liquidity measure

CTS Corporation's cash conversion cycle, which measures the time it takes for the company to convert its investments in inventory and other resources into cash inflows from sales, has shown some fluctuations over the years based on the provided data.

As of December 31, 2020, the company had a cash conversion cycle of 58.75 days, indicating that it takes approximately 58.75 days to turn its investments into cash. By December 31, 2021, this cycle had improved to 55.04 days, reflecting a more efficient management of working capital.

However, the cycle increased in the following years, reaching 60.39 days by December 31, 2022, and 60.94 days by December 31, 2023. This suggests potential challenges in managing inventory levels, collections from customers, and payment to suppliers.

By December 31, 2024, the cash conversion cycle had declined slightly to 59.87 days, but it remained higher compared to the previous year. Overall, a decreasing cash conversion cycle is generally considered favorable as it signifies that the company is efficiently managing its working capital and generating cash inflows more quickly. It would be important for CTS Corporation to continue monitoring and improving its cash conversion cycle to enhance its overall liquidity and financial performance.