Franklin Electric Co Inc (FELE)

The liquidity ratios of Franklin Electric Co., Inc. over the past five years show fluctuations in its ability to meet short-term obligations.

1. Current Ratio:
- The current ratio measures the company's ability to cover its short-term liabilities with its current assets.
- Franklin Electric's current ratio has varied over the years, reaching its lowest point in 2021 at 1.83, indicating a potential liquidity strain.
- However, the current ratio improved significantly in 2023 to 2.97, suggesting a stronger ability to meet short-term obligations.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventories from current assets.
- Franklin Electric's quick ratio has also shown fluctuations, with a low of 0.69 in 2021 and a high of 1.56 in 2020.
- In 2023, the quick ratio improved to 1.20, indicating a stronger ability to cover immediate liabilities without relying on inventory.

3. Cash Ratio:
- The cash ratio measures the company's ability to cover its short-term liabilities with its cash and cash equivalents.
- Franklin Electric's cash ratio has varied notably, with the lowest point observed in 2022 at 0.20 and the highest in 2020 at 0.78.
- The cash ratio in 2023 improved to 0.43, reflecting an enhanced capacity to settle short-term obligations with readily available cash.

In summary, Franklin Electric Co., Inc. has demonstrated improvements in its liquidity position in 2023 compared to previous years, as reflected in its current, quick, and cash ratios. Monitoring these ratios can provide insights into the company's short-term liquidity management and financial health.

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Additional liquidity measure

The cash conversion cycle of Franklin Electric Co., Inc. has shown fluctuations over the past five years.

In 2023, the company's cash conversion cycle improved to 134.36 days from 150.66 days in 2022. This indicates that Franklin Electric Co., Inc. took less time to convert its investments in inventory into cash during 2023.

However, comparing this to 2021, where the cash conversion cycle was 138.97 days, it seems that the cycle in 2023 was an improvement over the previous year, suggesting more efficient management of working capital.

Despite the improvement in 2023, the company's cash conversion cycle remains quite lengthy, which may indicate inefficiencies in managing inventory, receivables, and payables. Franklin Electric Co., Inc. should continue to focus on optimizing its cash conversion cycle to enhance its liquidity and overall financial performance.