Deluxe Corporation (DLX)

Based on the liquidity ratios provided for Deluxe Corporation, we can observe the following trends:

1. Current Ratio: The current ratio measures the company's ability to cover its short-term liabilities with its current assets. From December 31, 2020, where the current ratio was 1.23, there has been a decreasing trend over the years. The current ratio dropped to 0.91 by December 31, 2021, and further decreased to 0.94, 0.93, and then slightly improved to 0.98 by December 31, 2024. This indicates a potential strain on the company's short-term liquidity position.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. The trend in the quick ratio mirrors that of the current ratio, showing a significant decline from 0.37 on December 31, 2020, to only 0.05 by December 31, 2024. This suggests that Deluxe Corporation may have difficulty meeting its short-term obligations without relying on inventory.

3. Cash Ratio: The cash ratio indicates the proportion of a company's current assets held in cash or cash equivalents. Similarly to the current and quick ratios, the cash ratio experienced a downward trend over the years, declining from 0.37 on December 31, 2020, to 0.05 by December 31, 2024. This may imply a decreasing ability of Deluxe Corporation to pay off its short-term debts solely using cash on hand.

In conclusion, based on the liquidity ratios provided, Deluxe Corporation's liquidity position has weakened over the years, as evidenced by the decreasing current, quick, and cash ratios. It is important for the company to closely monitor its liquidity management and take appropriate actions to improve its ability to meet short-term financial obligations.

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Additional liquidity measure

The cash conversion cycle of Deluxe Corporation has shown variations over the years based on the provided data. In 2020, the cash conversion cycle was 20.04 days, indicating that on average it took the company 20.04 days to convert its investments in inventory and other resources into cash. By the end of 2021, there was an improvement as the cycle decreased to 14.42 days. This suggests that the company was able to manage its inventory and accounts receivable more efficiently, resulting in quicker cash conversion.

However, in 2022, the cash conversion cycle increased to 18.48 days, indicating a slight lag in converting investments into cash compared to the previous year. In 2023, there was a slight improvement with the cycle reducing to 14.92 days, but it was still higher than the 2021 level. By the end of 2024, there was a further improvement with the cycle decreasing to 13.35 days, suggesting that Deluxe Corporation was able to optimize its working capital management and accelerate its cash conversion process.

Overall, the trend in the cash conversion cycle of Deluxe Corporation indicates some fluctuations, but the general direction has been towards a more efficient conversion of investments into cash over the years, with a notable improvement between 2020 and 2021, and a gradual optimization in the subsequent years.