Fresh Del Monte Produce Inc (FDP)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 2.13 | 2.12 | 2.05 | 1.74 | 1.82 |
| Quick ratio | 1.02 | 1.04 | 0.86 | 0.78 | 0.82 |
| Cash ratio | 0.06 | 0.07 | 0.03 | 0.03 | 0.03 |
Fresh Del Monte Produce Inc's liquidity ratios have shown a generally positive trend over the past five years.
1. Current Ratio: The current ratio measures the company's ability to pay its short-term obligations with its current assets. From 2020 to 2024, the current ratio has improved from 1.82 to 2.13. This indicates that the company has increased its current assets relative to current liabilities, which suggests a stronger ability to meet its short-term financial obligations.
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. Fresh Del Monte's quick ratio has also shown an upward trend over the period, rising from 0.78 in 2021 to 1.02 in 2024. This improvement indicates that the company has dependable assets apart from inventory to meet its short-term liabilities.
3. Cash Ratio: The cash ratio measures the company's ability to cover its short-term liabilities with its cash and cash equivalents. Fresh Del Monte's cash ratio has fluctuated slightly but has mostly remained stable between 0.03 and 0.07 over the years. The increase in 2023 and subsequent decrease in 2024 suggests a slight improvement in the company's ability to cover its obligations with cash.
Overall, Fresh Del Monte Produce Inc's liquidity ratios reflect a favorable liquidity position, with increasing current and quick ratios indicating a strengthening ability to meet short-term financial commitments, along with a relatively stable cash ratio indicating consistent cash reserves to cover obligations.
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 75.78 | 73.89 | 72.00 | 64.20 | 57.41 |
The cash conversion cycle of Fresh Del Monte Produce Inc has shown a gradual increase over the past five years. Starting at 57.41 days as of December 31, 2020, it has grown to 75.78 days by December 31, 2024. This indicates that the company is taking longer to convert its investments in inventory into cash.
A longer cash conversion cycle may imply that Fresh Del Monte Produce Inc is experiencing difficulties in managing its working capital efficiently. Factors impacting this trend could include slower inventory turnover or an increase in the time taken by customers to pay for goods sold.
It is essential for the company to analyze the reasons behind this elongation of the cash conversion cycle and implement strategies to shorten it. This could involve improving inventory management practices, negotiating better payment terms with suppliers, or enhancing collection processes from customers. By addressing these issues, Fresh Del Monte Produce Inc can optimize its cash flow and overall financial performance.