Federal Signal Corporation (FSS)

Federal Signal Corporation's liquidity position can be assessed through its current ratio, quick ratio, and cash ratio over the years from 2020 to 2024.

The current ratio, which measures the company's ability to meet short-term obligations with its current assets, fluctuated slightly over the years, ranging from 2.53 to 2.94. The company maintained a healthy current ratio above 2, indicating a strong ability to cover its current liabilities with its current assets.

The quick ratio, also known as the acid-test ratio, provides a more stringent assessment of liquidity by excluding inventory from current assets. Despite seeing some variability, the quick ratio remained relatively low, ranging from 0.24 to 0.38. This suggests that Federal Signal Corporation may have a limited ability to cover immediate liabilities with its most liquid assets.

Similarly, the cash ratio, which measures the proportion of cash and cash equivalents to current liabilities, remained relatively stable at 0.24 to 0.38 over the years. This indicates that the company may have limited cash reserves compared to its short-term obligations.

Overall, while Federal Signal Corporation's current ratio indicates a healthy liquidity position, the quick ratio and cash ratio suggest that the company may benefit from increasing its liquid assets to better meet its short-term obligations.

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Additional liquidity measure

The cash conversion cycle of Federal Signal Corporation has shown varying trends over the years. In 2020, the company's cash conversion cycle stood at 80.66 days, indicating that it took on average 80.66 days to convert its investments in inventory and other resources into cash flows from sales.

By the end of 2021, the cash conversion cycle increased to 90.45 days, suggesting a slower conversion process from resources to cash. This could indicate potential issues such as inventory build-up or delays in collecting receivables.

In 2022, the cash conversion cycle further extended to 98.02 days, reaching its peak in recent years. A longer cash conversion cycle may put pressure on the company's liquidity and working capital management.

However, the cycle decreased in 2023 to 87.03 days, showing some improvement in converting resources into cash. This reduction may reflect efforts to streamline operations and enhance efficiency in managing working capital.

By the end of 2024, the cash conversion cycle slightly increased to 90.94 days, signaling a slightly slower conversion process compared to the previous year. It is essential for Federal Signal Corporation to monitor and manage its cash conversion cycle effectively to optimize working capital efficiency and overall financial performance.