Fortune Brands Innovations Inc. (FBIN)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.70 | 1.59 | 1.39 | 1.64 | 1.35 |
| Quick ratio | 0.75 | 0.81 | 0.69 | 0.86 | 0.72 |
| Cash ratio | 0.31 | 0.47 | 0.24 | 0.31 | 0.28 |
Based on the provided data for Fortune Brands Innovations Inc., we can analyze the liquidity ratios over the past five years.
1. Current Ratio:
Fortune Brands Innovations Inc.'s current ratio has shown a generally upward trend from 2019 to 2023. The current ratio indicates the company's ability to cover its short-term liabilities with its current assets. A current ratio above 1 is generally considered healthy, and the company has consistently maintained a current ratio above 1 over the years. The current ratio improved significantly from 2019 to 2020, dipped slightly in 2021, and then rebounded in 2022 and 2023, indicating improved short-term liquidity position.
2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, measures the company's ability to meet its short-term obligations with its most liquid assets. Fortune Brands Innovations Inc.'s quick ratio has fluctuated over the years, with some fluctuations indicating changes in the composition of current assets. The decreasing trend from 2020 to 2023 suggests a potential reduction in quick assets relative to current liabilities. Although the quick ratio has been below 1 in recent years, indicating potential concerns about the company's ability to meet immediate obligations with its most liquid assets, it is important to further investigate the nature of current assets to assess liquidity effectively.
3. Cash Ratio:
The cash ratio measures a company's ability to cover its short-term liabilities with its cash and cash equivalents alone. Fortune Brands Innovations Inc.'s cash ratio has shown variability over the years, with a mix of improvements and declines. The cash ratio was highest in 2022, indicating a relatively stronger cash position that year. However, the cash ratio decreased in 2023, potentially signaling increased reliance on other current assets to cover short-term obligations.
In conclusion, Fortune Brands Innovations Inc. has generally maintained a current ratio above 1, indicating a satisfactory ability to cover short-term liabilities with current assets. However, the quick and cash ratios have displayed more fluctuations, suggesting potential shifts in the composition of current assets impacting liquidity. Further analysis of the components contributing to these ratios would provide a deeper understanding of the company's liquidity position and its ability to meet short-term obligations.
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 79.84 | 118.78 | 109.54 | 135.88 | 64.99 |
The cash conversion cycle of Fortune Brands Innovations Inc. has fluctuated over the past five years. In 2023, the company's cash conversion cycle stands at 79.84 days, representing an improvement from the previous year's 118.78 days. This indicates that the company has been more efficient in managing its cash flow and working capital in the most recent period.
Comparing to historical data, the cash conversion cycle was relatively shorter in 2019 at 64.99 days but increased significantly in 2020 to 135.88 days before gradually decreasing in the subsequent years. This suggests that there may have been issues in cash flow management or working capital efficiency in 2020, which the company has since worked to address and improve.
In general, a shorter cash conversion cycle indicates that the company is able to convert its resources into cash more quickly, which is a positive sign of operational efficiency and liquidity management. However, it is important to continue monitoring trends in the cash conversion cycle to ensure ongoing effectiveness in managing working capital and cash flow.