International Flavors & Fragrances Inc (IFF)

International Flavors & Fragrances Inc's liquidity ratios indicate the company's ability to meet its short-term obligations.

1. Current Ratio: The current ratio for the company has fluctuated over the years, ranging from a low of 1.53 to a high of 2.62 as of September 30, 2024. Generally, a current ratio above 1 is considered healthy, as it shows the company has more current assets than current liabilities. The current ratio has been consistently above 1 over the periods analyzed, indicating that the company has sufficient current assets to cover its short-term liabilities.

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. International Flavors & Fragrances Inc's quick ratio has ranged between 0.12 and 0.37, with a lower ratio indicating a smaller margin of safety. While the quick ratio is generally lower than the current ratio, it's important to note that the company has maintained a reasonable level of quick assets relative to current liabilities, suggesting some liquidity buffer.

3. Cash Ratio: The cash ratio measures the company's ability to cover its short-term obligations using only its most liquid assets, cash, and cash equivalents. The cash ratio for International Flavors & Fragrances Inc has shown a similar pattern to the quick ratio, ranging from 0.11 to 0.37. A higher cash ratio indicates a stronger ability to cover short-term liabilities with cash on hand. The company's cash ratio has remained relatively stable over time, indicating a reasonable level of liquidity.

In conclusion, International Flavors & Fragrances Inc's liquidity ratios, particularly the current ratio, quick ratio, and cash ratio, demonstrate that the company has maintained a level of liquidity to meet its short-term obligations effectively. However, fluctuations in these ratios suggest the need for continued monitoring of the company's liquidity position to ensure ongoing financial health and stability.

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Additional liquidity measure

The cash conversion cycle of International Flavors & Fragrances Inc has shown fluctuations over the observed periods. The cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash from sales.

From March 31, 2020, to December 31, 2024, the company's cash conversion cycle has displayed a decreasing trend initially, with a peak at 240.58 days in March 31, 2021, indicating a prolonged period between investing in resources and receiving cash from sales. However, there was a subsequent improvement in efficiency as the cycle reduced to 101.36 days by December 31, 2024.

A shorter cash conversion cycle suggests that International Flavors & Fragrances Inc has been able to manage its inventory, receivables, and payables effectively, resulting in a quicker turnaround of cash from its operational activities. This could indicate improved liquidity and financial performance for the company during the latter part of the observed period.

Overall, monitoring and managing the cash conversion cycle is essential for International Flavors & Fragrances Inc to optimize working capital management and enhance its overall financial health.