Installed Building Products Inc (IBP)

The liquidity ratios of Installed Building Products Inc indicate the company's ability to meet its short-term obligations.

1. Current Ratio: The current ratio for Installed Building Products has been relatively stable over the period, ranging from 2.25 to 3.18. This ratio depicts the company's ability to cover its short-term liabilities with its current assets. A current ratio above 1 indicates that the company has more current assets than current liabilities, and a higher ratio suggests a stronger liquidity position. Installed Building Products generally maintained a healthy current ratio above 2, indicating good short-term liquidity throughout the period.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, measures the company's ability to pay off its current liabilities without relying on the sale of inventory. Installed Building Products' quick ratio fluctuated more compared to the current ratio, ranging from 0.45 to 1.26. The quick ratio remained above 1 for most of the period, which suggests the company had an adequate level of liquid assets to cover its short-term liabilities without relying heavily on inventory.

3. Cash Ratio: The cash ratio is the most conservative liquidity ratio as it only considers cash and cash equivalents to current liabilities. This ratio provides a clear picture of a company's immediate ability to meet its short-term obligations. Installed Building Products' cash ratio ranged from 0.45 to 1.26, indicating that the company had a varying capacity to cover its short-term liabilities with cash on hand.

In summary, Installed Building Products Inc maintained solid liquidity ratios throughout the period, with the current ratio consistently above 2, indicating a healthy ability to cover short-term obligations. The fluctuation in the quick and cash ratios suggests some variability in the company's ability to quickly cover short-term obligations with liquid assets, but overall, the liquidity position appears to be sound.

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Additional liquidity measure

Installed Building Products Inc's cash conversion cycle has shown some fluctuations over the past few years. The company's cash conversion cycle, which measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales, was around 24 days in the first quarter of 2020.

However, there was a gradual increase in the cash conversion cycle over the following quarters, reaching a peak of 43.71 days in the second quarter of 2022. This indicates that the company was taking longer to convert its investments into cash during that period.

Subsequently, there was a decrease in the cash conversion cycle, with it stabilizing around 30 days in the last few quarters of 2023 and into 2024. This suggests that Installed Building Products Inc improved its efficiency in managing its inventory and accounts receivable, leading to a quicker conversion of investments into cash.

Overall, analyzing the trend in the cash conversion cycle can provide insights into the company's operational efficiency, effectiveness of working capital management, and liquidity position. It is crucial for the company to monitor and manage its cash conversion cycle effectively to ensure optimal cash flow and financial stability.