Dorman Products Inc (DORM)

The current ratio measures the company's ability to meet short-term obligations with its short-term assets. Dorman Products Inc's current ratio has shown some fluctuations over the past five years, ranging from a low of 1.62 in 2021 to a high of 3.42 in 2019. The current ratio has generally been above 1, indicating that the company has been able to cover its current liabilities with its current assets. However, the ratio decreased in 2022 and 2023, which may indicate a potential risk in meeting short-term obligations.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Dorman Products Inc's quick ratio has also fluctuated over the past five years, ranging from a low of 0.76 in 2022 to a high of 2.15 in 2019. The quick ratio has generally been above 1, although it decreased in 2022 and 2023, indicating a potential limitation in the company's ability to cover its short-term liabilities without relying on inventory.

The cash ratio specifically evaluates the company's ability to cover its current liabilities with its cash and cash equivalents. Dorman Products Inc's cash ratio has been relatively low over the past five years, with a noticeable decrease from 0.51 in 2020 to 0.13 in 2023. This suggests that the company may have limited cash reserves to cover its immediate obligations, which could potentially raise concerns about its liquidity position.

In summary, while Dorman Products Inc has generally maintained current and quick ratios above 1, indicating a satisfactory level of liquidity, the downward trends in these ratios in 2022 and 2023, as well as the consistently low cash ratio, suggest a potential need for the company to closely monitor and manage its liquidity position.

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Additional liquidity measure

The trend in Dorman Products Inc's cash conversion cycle over the past five years shows a fluctuating pattern. In 2023, the cash conversion cycle decreased significantly to 234.79 days compared to the previous year's 269.80 days. This suggests that the company is managing its cash flows more efficiently, possibly through improving inventory turnover or reducing the days sales outstanding.

While the cash conversion cycle in 2023 is lower than in 2022, it is still higher than the levels observed in 2020 and 2019. This indicates that there may still be opportunities for Dorman Products Inc to further optimize its working capital management processes to shorten the cash conversion cycle even more.

Overall, monitoring and potentially further reducing the cash conversion cycle can help Dorman Products Inc improve its liquidity, profitability, and overall financial health.