Graco Inc (GGG)

Graco Inc's liquidity ratios have shown some fluctuations over the years. The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, decreased from 3.19 in 2020 to 2.69 in 2021 but then improved to 3.01 in 2022, 3.46 in 2023, and 3.69 in 2024. This indicates that the company's liquidity position improved over the years and its ability to meet short-term obligations increased.

On the other hand, the quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, showed some variability. It was 1.18 in 2020, slightly increased to 1.23 in 2021, dropped to 0.85 in 2022, but then improved to 1.36 in 2023 and 1.66 in 2024. This suggests that while the company may have had some challenges in quickly covering its short-term obligations in 2022, it has since strengthened its liquidity position.

The cash ratio, which is the most conservative measure of liquidity as it only considers cash and cash equivalents, mirrored the trend of the quick ratio. It remained at 1.18 in 2020 and 1.23 in 2021, dropped to 0.85 in 2022, and then improved significantly to 1.36 in 2023 and 1.66 in 2024. This indicates that Graco Inc has been able to build up its cash reserves over the years, enhancing its ability to cover its immediate liabilities.

Overall, the liquidity ratios suggest that Graco Inc's financial health in terms of short-term liquidity has generally improved over the years, with the company being better positioned to meet its short-term obligations and weather any unforeseen liquidity challenges.

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Additional liquidity measure

The cash conversion cycle of Graco Inc has shown a fluctuating trend over the past five years. From December 31, 2020, where it stood at 131.14 days, the cycle increased to 146.32 days by December 31, 2021. There was a further increase to 160.24 days by December 31, 2022, indicating a prolonged period for the company to convert its investments in inventory back into cash.

However, there was a slight improvement by December 31, 2023, with the cash conversion cycle decreasing to 154.65 days. Finally, as of December 31, 2024, the cycle decreased further to 149.07 days, signaling a more efficient management of working capital during that period.

Overall, the cash conversion cycle of Graco Inc has experienced variability, with efforts towards optimizing working capital efficiency evident in the latter part of the period under review. Monitoring and managing the cash conversion cycle is crucial for Graco Inc to ensure the effective utilization of resources and maintain healthy liquidity levels in the long term.