HNI Corp (HNI)

The analysis of HNI Corp's liquidity ratios reveals a mixed performance over the years.

1. Current Ratio: The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, shows a fluctuating trend. From 2020 to 2024, the current ratio decreased initially, reaching a low of 1.03 in 2021, before gradually improving to 1.10 in 2024. Although the ratio has been above 1 in all years, indicating the company can cover its short-term liabilities, the downward trend in the middle years may raise some concerns about liquidity management.

2. Quick Ratio: The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, reflects a declining trend over the years. The ratio decreased from 0.74 in 2020 to a significant low of 0.06 in 2024. This suggests that HNI Corp may have had challenges in meeting its short-term obligations with its most liquid assets in the most recent year.

3. Cash Ratio: The cash ratio, which specifically looks at the company's ability to cover its current liabilities with its cash and cash equivalents, shows a decrease from 0.27 in 2020 to 0.06 in 2024. This declining trend indicates a reduced ability to cover immediate obligations with cash reserves alone.

In summary, while HNI Corp has managed to maintain current ratios above 1 in all years, indicating a basic level of liquidity, the decreasing trends in quick ratio and cash ratio raise concerns about the company's ability to meet short-term obligations using its most liquid assets. Further analysis and monitoring of liquidity management strategies may be required to ensure financial stability.

---

Additional liquidity measure

The cash conversion cycle of HNI Corp has shown a slight increase over the years, starting at 28.83 days on December 31, 2020, and reaching 37.50 days on December 31, 2023, before experiencing a significant decrease to 0.61 days on December 31, 2024.

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory into cash flows from sales. A shorter cash conversion cycle is generally favorable as it indicates that the company is efficiently managing its working capital.

The increase in the cash conversion cycle from 2020 to 2023 may suggest potential challenges in managing inventory, receivables, and payables efficiently. However, the sharp decrease to 0.61 days in 2024 indicates a significant improvement in the company's cash conversion efficiency, possibly due to improved inventory management or faster collection of receivables.

It would be important to further investigate the underlying factors contributing to these fluctuations in the cash conversion cycle to better understand HNI Corp's working capital management and operational performance.