Federal Signal Corporation (FSS)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 2.91 | 2.94 | 2.53 | 2.73 | 2.25 |
| Quick ratio | 1.26 | 1.23 | 1.04 | 1.41 | 1.03 |
| Cash ratio | 0.31 | 0.26 | 0.24 | 0.55 | 0.20 |
Federal Signal Corp.'s liquidity ratios have shown a generally positive trend over the past five years. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, has been consistently above 2, indicating a strong liquidity position. The slight decrease in the current ratio from 2.94 in 2022 to 2.91 in 2023 is not alarming and still suggests a healthy liquidity position.
The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, has also shown improvement over the years. Despite some fluctuations, the quick ratio has generally been above 1, indicating that the company can cover its short-term liabilities without relying on selling inventory. In 2023, the quick ratio stands at 1.36, showing a stronger liquidity position compared to the previous year.
The cash ratio, which measures the company's ability to meet short-term obligations with its most liquid assets (cash and cash equivalents), has shown some variability over the years. However, the trend has been positive overall, with the cash ratio increasing from 0.27 in 2019 to 0.41 in 2023. This indicates that Federal Signal Corp. has been able to increase its cash reserves relative to its short-term liabilities.
In summary, Federal Signal Corp. appears to have a strong liquidity position based on its current, quick, and cash ratios. The company has maintained a healthy ability to meet its short-term financial obligations, with improvements seen in some ratios over the years.
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 107.35 | 117.99 | 105.78 | 99.15 | 88.00 |
The cash conversion cycle of Federal Signal Corp. has shown fluctuations over the past five years. In 2023, the company's cash conversion cycle was 107.35 days, which is a slight improvement compared to 117.99 days in 2022. However, it is higher than the cycles in 2021, 2020, and 2019, which were 105.78 days, 99.15 days, and 88.00 days, respectively.
The cash conversion cycle represents the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A longer cash conversion cycle may indicate inefficiencies in the company's management of inventory, receivables, and payables. Therefore, Federal Signal Corp. should carefully evaluate its supply chain management practices and working capital policies to optimize its cash conversion cycle and improve its overall financial performance.