Dorman Products Inc (DORM)

Dorman Products Inc's liquidity ratios provide insights into its ability to meet short-term obligations and manage its cash effectively.

The current ratio has shown some fluctuations over the years, ranging from a low of 1.61 in September 2020 to a high of 2.93 in June 2021. As of December 31, 2024, the current ratio stands at a healthy 2.43, indicating the company has more than twice the current assets to cover its current liabilities. This generally reflects a strong liquidity position that can support day-to-day operations and cover short-term debts.

The quick ratio, also known as the acid-test ratio, measures the company's ability to meet immediate obligations without relying on the sale of inventory. Dorman Products Inc's quick ratio has fluctuated over time, with a low of 0.05 in March 2022 and a high of 1.10 in June 2020. As of December 31, 2024, the quick ratio stands at 0.10, indicating a slight improvement in the company's ability to cover short-term liabilities with its most liquid assets.

The cash ratio, which is the most stringent liquidity ratio, reflects the proportion of a company's current assets held in cash or cash equivalents. Dorman Products Inc's cash ratio has generally remained low, with a range of 0.05 to 0.51 during the period analyzed. As of December 31, 2024, the cash ratio stands at 0.10, indicating that the company holds 10 cents in cash for every dollar of current liabilities, possibly suggesting a lower cash reserve compared to other current assets.

In conclusion, while Dorman Products Inc's current ratio indicates a comfortable liquidity position, the quick and cash ratios suggest that the company may need to focus on improving its immediate liquidity and cash management strategies to strengthen its overall financial health. It is important for the company to maintain an appropriate balance between current assets and liabilities to ensure smooth operations and financial stability.

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Additional liquidity measure

The cash conversion cycle of Dorman Products Inc has shown some fluctuations over the period analyzed. Initially, the company's cash conversion cycle was around 140 days, indicating that it took Dorman Products approximately 140 days to convert its investments in inventory and other resources back into cash.

However, from March 2021 to June 2022, the cash conversion cycle increased significantly, reaching a peak of 226.47 days in September 2022. This prolonged cycle suggests that Dorman Products faced challenges in efficiently managing its cash flows and converting its resources into cash within a reasonable timeframe.

Subsequently, the company managed to decrease its cash conversion cycle, reaching a low of 177.31 days in September 2023. This improvement indicates that Dorman Products made efforts to streamline its operations and enhance its working capital management practices.

Overall, the fluctuation in Dorman Products Inc's cash conversion cycle over the period suggests varying efficiency levels in managing its operating cycle, inventory turnover, and accounts receivable collection. It is essential for the company to continue monitoring and optimizing its cash conversion cycle to ensure a healthy and efficient working capital management strategy.