Insteel Industries Inc (IIIN)

The liquidity ratios of Insteel Industries, Inc. have shown varying trends over the past five years.

The current ratio, which measures the company's ability to meet short-term obligations with its short-term assets, has shown an increasing trend from 2019 to 2023. This indicates that the company's current assets have consistently exceeded its current liabilities. A current ratio of 6.47 in 2023 suggests that Insteel Industries has a strong ability to cover its short-term obligations.

The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also shown an increasing trend, albeit with fluctuations. A quick ratio of 4.24 in 2023 indicates that the company has a strong ability to meet its short-term obligations even when inventory is excluded.

The cash ratio, which is the most conservative measure of liquidity as it only considers cash and cash equivalents, has significantly improved from 2019 to 2023. The ratio of 2.86 in 2023 indicates that Insteel Industries has a higher proportion of cash and cash equivalents to cover its current liabilities, which reflects a strong liquidity position.

Overall, the liquidity ratios of Insteel Industries, Inc. have generally strengthened over the past five years, indicating an improved ability to meet its short-term obligations and suggesting good financial health in terms of liquidity management.

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Additional liquidity measure

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A shorter cash conversion cycle is generally preferred as it indicates the company is able to efficiently manage its working capital.

In the case of Insteel Industries, Inc., the cash conversion cycle has fluctuated over the past five years, with the cycles ranging from 65.01 days to 123.51 days. The significant increase in the cash conversion cycle in October 2022 could indicate a deterioration in the company's efficiency in managing its working capital, potentially due to factors such as slower inventory turnover or longer collection periods for accounts receivable.

However, the cash conversion cycle improved in September 2023 to 78.78 days, which suggests the company may have implemented measures to enhance its working capital management. This improvement could be attributed to factors such as better inventory control, streamlined production processes, or more effective receivables management.

Overall, Insteel Industries, Inc. should continue to monitor and strive to improve its cash conversion cycle to ensure efficient management of its working capital and maximize cash flow from its operating activities.