Flowers Foods Inc (FLO)

The liquidity ratios of Flowers Foods Inc indicate its ability to meet short-term obligations and manage its current liabilities effectively.

1. Current Ratio: The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, decreased from 2.01 in 2020 to 1.20 in 2024. A ratio above 1 suggests that Flowers Foods Inc has more current assets than current liabilities, but the declining trend indicates a potential decline in liquidity and may require closer monitoring.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Flowers Foods Inc experienced a significant decrease in the quick ratio from 0.61 in 2020 to 0.01 in 2024. This sharp decline may raise concerns about the company's ability to meet its short-term liabilities without relying on inventory.

3. Cash Ratio: The cash ratio, which reflects the proportion of cash and cash equivalents to current liabilities, followed a similar downward trend, dropping from 0.61 in 2020 to 0.01 in 2024. This decline indicates a diminishing ability to cover immediate liabilities with cash on hand, highlighting a potential strain on liquidity position.

In summary, Flowers Foods Inc's liquidity position, as depicted by the declining current, quick, and cash ratios over the years, suggests a weakening ability to meet short-term obligations without relying heavily on inventory or cash reserves. This trend raises concerns about the company's liquidity management and the need for strategies to enhance its short-term financial solvency.

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Additional liquidity measure

The cash conversion cycle of Flowers Foods Inc has shown a gradual increasing trend over the past five years, starting at 32.13 days as of December 31, 2020, and reaching 37.20 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 can potentially strain the company's liquidity and working capital management as it ties up funds in inventory and accounts receivable for a longer period before realizing cash inflows.

Flowers Foods Inc should closely monitor and manage its inventory, accounts receivable, and accounts payable to improve its cash conversion cycle efficiency and optimize its working capital utilization. Additionally, the company may need to review its supply chain and sales operations to streamline processes and reduce the time taken to convert investments into cash.