Darling Ingredients Inc (DAR)

Darling Ingredients Inc's liquidity ratios show fluctuations over the five-year period analyzed. The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, has generally improved from 1.33 in 2019 to 1.86 in 2023. This indicates that the company's short-term liquidity position has strengthened over the years, with current assets increasing relative to current liabilities.

In contrast, the quick ratio, a more stringent measure that excludes inventory from current assets, decreased significantly from 0.70 in 2019 to 0.14 in 2023. This decline suggests that Darling Ingredients Inc may have a lower ability to meet its short-term obligations using its most liquid assets.

The cash ratio, which is the most conservative liquidity measure as it only considers cash and cash equivalents in comparison to current liabilities, also shows fluctuations over the years, ranging from 0.09 in 2021 to 0.13 in 2023. This implies that the company's cash position relative to its short-term liabilities has slightly improved in recent years.

Overall, while the company's current ratio has improved, indicating better overall liquidity, the significant decline in the quick ratio raises some concerns about the company's ability to quickly cover its short-term obligations without relying on selling inventory. Monitoring cash flow management and working capital efficiency would be crucial for Darling Ingredients Inc to maintain a healthy liquidity position.

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Additional liquidity measure

The cash conversion cycle of Darling Ingredients Inc has shown fluctuations over the past five years. In 2023, the company's cash conversion cycle decreased significantly to 20.02 days compared to the prior year, indicating an improvement in managing its cash flow efficiency. This reduction suggests that Darling Ingredients has streamlined its processes to convert its investments in inventory and accounts receivable into cash more quickly.

In contrast, in 2020 and 2019, the cash conversion cycle was relatively higher at 58.63 days and 59.45 days, respectively, signifying a longer time it took for the company to convert its resources into cash during those years. This prolonged cash conversion cycle might have been influenced by factors such as inventory management, payment terms with suppliers, and collection periods from customers.

Overall, a lower cash conversion cycle indicates that Darling Ingredients is managing its working capital more effectively, which can potentially lead to improved liquidity and financial performance. Monitoring this metric over time can provide insights into the company's operational efficiency and effectiveness in managing its cash flow.