Healthcare Services Group Inc (HCSG)

Healthcare Services Group, Inc. has demonstrated consistent liquidity strength over the past five years, as indicated by its current, quick, and cash ratios. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, has shown a slight decline from 3.53 in 2020 to 2.64 in 2023. Despite the decrease, the current ratio remains above 1, which indicates that the company has more than enough current assets to cover its current liabilities.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also exhibited a decreasing trend over the same period, dropping from 3.33 in 2020 to 2.55 in 2023. However, the quick ratio remains well above the acceptable threshold of 1, indicating a strong ability to meet short-term obligations without relying on selling inventory.

The cash ratio, which signifies the company's ability to pay off immediate liabilities with its cash and cash equivalents, fluctuated over the past five years but showed a downward trend overall. The cash ratio decreased from 1.76 in 2020 to 0.78 in 2023. Although the cash ratio is the lowest among the three liquidity ratios, it is still above 0.5, suggesting that Healthcare Services Group, Inc. has a sufficient level of cash to cover its short-term obligations.

Overall, the liquidity ratios of Healthcare Services Group, Inc. indicate a solid financial position with a strong ability to meet its short-term obligations, despite a slight decline in liquidity levels over the years.

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Additional liquidity measure

The cash conversion cycle of Healthcare Services Group, Inc. has fluctuated over the past five years, indicating varying efficiency in managing its working capital.

In 2023, the company's cash conversion cycle increased to 67.53 days from 62.66 days in 2022, suggesting a longer time to convert its investments in inventory and accounts receivable into cash. This increase may be a result of slower collection of receivables or higher inventory holding periods.

Comparing to 2021 where the cash conversion cycle was 57.27 days, the company took longer to convert its working capital into cash in 2023. This trend continued from 2020 when the cycle was 47.92 days.

In 2019, the company experienced a higher cash conversion cycle at 63.55 days compared to 2022, but managed to improve the efficiency in 2021 by reducing it to 57.27 days.

Overall, Healthcare Services Group, Inc. should focus on optimizing its cash conversion cycle to improve its working capital management and enhance overall liquidity and financial performance.