Heritage Financial Corporation (HFWA)

The liquidity ratios of Heritage Financial Corp. provide insights into the company's ability to meet its short-term obligations.

1. Current ratio: This ratio measures the company's ability to cover its short-term liabilities with its current assets. Throughout the five years analyzed, Heritage Financial Corp. has maintained a stable current ratio around 1.06 to 1.07. This suggests that the company has just enough current assets to cover its current liabilities. While a current ratio of 1 is generally considered adequate, the consistency in Heritage Financial Corp.'s current ratio indicates a reliable liquidity position.

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. Heritage Financial Corp.'s quick ratio has shown some fluctuation over the years, ranging from 0.27 to 0.48. In 2023, the quick ratio decreased to 0.38, indicating that the company may have had difficulty meeting its short-term obligations without relying on inventory. However, the quick ratio has generally improved over the last three years, suggesting better liquidity management.

3. Cash ratio: The cash ratio is the most conservative liquidity measure, focusing solely on the ability to cover current liabilities with cash and cash equivalents. Heritage Financial Corp.'s cash ratio has generally been stable, with values ranging from 0.26 to 0.48. In 2023, the cash ratio dropped to 0.37, indicating a slightly reduced ability to cover short-term obligations with cash alone. However, the company's cash ratio remains above 0.3, indicating a reasonable level of liquidity.

Overall, based on the liquidity ratios analysis, Heritage Financial Corp. appears to have maintained a satisfactory liquidity position over the years, with adequate ability to meet its short-term obligations.

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Additional liquidity measure

The cash conversion cycle of Heritage Financial Corp. has fluctuated over the past five years. In 2023, the company's cash conversion cycle decreased to 23.50 days from 26.34 days in 2022. This improvement indicates that the company is efficiently managing its cash flow and converting its investments in inventory and accounts receivable into cash more quickly.

Comparing the current cycle to previous years, in 2021 the company had a relatively shorter cycle of 21.62 days, indicating even better efficiency in managing working capital compared to 2023. However, in 2020, the cash conversion cycle increased to 28.18 days, suggesting potential challenges in managing cash flow during that period. The cycle improved significantly in 2019 to 21.06 days, reflecting efficient working capital management.

Overall, while there have been fluctuations in the cash conversion cycle of Heritage Financial Corp. over the past five years, the recent decrease in 2023 is a positive trend signaling improved efficiency in managing cash flow and working capital.