Enerpac Tool Group Corp (EPAC)

The liquidity ratios of Enerpac Tool Group Corp indicate the company's ability to meet its short-term obligations and cover immediate financial needs.

1. The current ratio has shown fluctuations over the past five years, ranging from 2.24 to 3.23. A current ratio above 1 indicates that the company has more current assets than current liabilities. Enerpac Tool Group Corp's current ratio has generally been healthy, with the highest level recorded in 2020. The current ratio for 2024 has improved significantly compared to the previous year, reaching 2.88, indicating that the company has sufficient current assets to cover its current liabilities.

2. The quick ratio, a more stringent measure of liquidity, focuses on the company's ability to meet its short-term liabilities without relying on inventory. Enerpac Tool Group Corp's quick ratio has ranged from 1.48 to 2.24 over the past five years. A quick ratio above 1 is considered favorable, and the company has maintained a healthy quick ratio throughout the years. The quick ratio for 2024 has improved to 2.10 from 1.70 in 2023, highlighting the company's ability to meet short-term obligations using liquid assets.

3. The cash ratio provides the most conservative measure of liquidity, focusing solely on the company's ability to cover its current liabilities with cash and cash equivalents. Enerpac Tool Group Corp's cash ratio has varied from 0.79 to 1.44 over the past five years. A cash ratio above 1 indicates that the company can fully cover its current liabilities with cash on hand. The cash ratio for 2024 has increased to 1.29, demonstrating an improvement in the company's cash position compared to the prior year.

Overall, the liquidity ratios of Enerpac Tool Group Corp reflect a generally healthy liquidity position, with an improvement in 2024 across all three ratios. The company appears to have adequate liquidity to meet its short-term obligations and fund its operational needs.

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Additional liquidity measure

The cash conversion cycle of Enerpac Tool Group Corp has shown some fluctuation over the past five years. The cycle represents the time taken by the company to convert its investments in inventory and other resources into cash from sales.

In Aug 2024, the cash conversion cycle was at 101.95 days, indicating that on average, it took Enerpac just under 102 days to convert its investments in inventory and other operational expenses into cash from sales. This suggests a relatively longer operating cycle for the company compared to the previous year.

In Aug 2023, the cash conversion cycle was at 88.82 days, showing a slight increase from the prior year. This increase may indicate that the company took slightly longer to convert its investments into cash in comparison to the year before.

In Aug 2022, the cash conversion cycle decreased to 81.51 days, representing an improvement in efficiency compared to the prior year. This suggests that Enerpac was able to manage its working capital more effectively and convert its investments into cash at a quicker pace.

In Aug 2021, the cash conversion cycle was at 88.39 days, showing a slight increase in comparison to the previous year. This may suggest that the company faced challenges in converting its investments into cash efficiently during that period.

In Aug 2020, the cash conversion cycle was at 94.14 days, indicating that it took Enerpac just over 94 days to convert its investments into cash from sales. This figure was higher than the following years, implying that the company's efficiency in managing its working capital had improved in the years that followed.

Overall, the cash conversion cycle of Enerpac Tool Group Corp has shown some variability over the past five years, with fluctuations likely influenced by factors such as inventory management, accounts receivable, and accounts payable practices. analysing the trend over the years helps in understanding the effectiveness of the company's working capital management strategy.