Darling Ingredients Inc (DAR)

Darling Ingredients Inc's current ratio has exhibited fluctuations over the past five years, ranging from a low of 1.38 to a high of 1.85. Generally, the current ratio has remained above 1, indicating the company's ability to meet its short-term obligations with its current assets. The current ratio saw a slight decline in the most recent period to 1.38, suggesting potential challenges in covering short-term liabilities.

In terms of the quick ratio, Darling Ingredients Inc experienced significant variability, with values ranging from as low as 0.09 to as high as 9.37. This high variability may be attributed to fluctuations in the composition of current assets, particularly inventories, in relation to current liabilities. The quick ratio improved in recent periods, reaching 0.45 as of June 30, 2024, indicating a better ability to meet short-term obligations without relying heavily on inventory liquidation.

The cash ratio, a measure of a company's ability to cover short-term liabilities with its cash and cash equivalents, showed a similar level of variability in Darling Ingredients Inc's financial performance. The cash ratio ranged from 0.09 to 9.37, reflecting fluctuations in the company's cash position over time. As of December 31, 2024, the cash ratio stood at 0.34, indicating a moderate ability to cover short-term obligations solely with its cash reserves.

Overall, Darling Ingredients Inc's liquidity ratios have shown variability over the years, with the current ratio generally above 1, indicating a satisfactory short-term liquidity position. However, the company may need to closely monitor its current assets composition to ensure its ability to meet short-term obligations, especially given the recent decline in the current ratio.

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Additional liquidity measure

The cash conversion cycle of Darling Ingredients Inc has shown some fluctuations over the past few years, with the cycle ranging from a low of 16.48 days to a high of 65.08 days. The trend demonstrates some level of variability in managing its working capital effectively.

The company's cash conversion cycle peaked in the third quarter of 2023 at 65.08 days, indicating a relatively longer time taken to convert its resources into cash. However, there was a significant improvement in the subsequent quarters, with the cycle decreasing to 20.02 days by the end of December 2023, a positive sign of efficient working capital management.

Throughout the period under review, Darling Ingredients Inc experienced some periods where its cash conversion cycle was relatively stable around the 40 to 50-day range, with occasional deviations. Notably, there were instances of shorter cycles as seen in the second and third quarters of 2024, which could be an indication of improved efficiency in managing inventory and receivables.

Overall, the fluctuating nature of Darling Ingredients Inc's cash conversion cycle suggests that the company may need to focus on streamlining its operational processes to enhance working capital efficiency and ensure a consistent cash flow cycle. Monitoring and optimizing the cash conversion cycle can help the company maintain financial health and sustainability in the long run.