Innospec Inc (IOSP)

Innospec Inc's liquidity ratios have shown a generally positive trend over the past five years, indicating the company's ability to meet its short-term obligations. The current ratio, which measures the company's ability to pay its short-term liabilities with its short-term assets, has improved gradually from 2.08 in 2019 to 2.38 in 2023. This suggests that the company has a relatively strong liquidity position, with sufficient current assets to cover its current liabilities.

Similarly, the quick ratio, also known as the acid-test ratio, reflects the company's ability to meet its short-term obligations without relying on inventory. The quick ratio has also shown improvement over the years, increasing from 1.27 in 2019 to 1.58 in 2023. This indicates that the company has a comfortable liquidity position even when excluding inventory from its current assets.

Furthermore, the cash ratio, which measures the company's ability to cover its short-term liabilities with cash and cash equivalents, has also improved steadily over the years. The cash ratio increased from 0.31 in 2019 to 0.61 in 2023, indicating that the company has increased its cash reserves relative to its short-term obligations.

Overall, the liquidity ratios of Innospec Inc demonstrate a healthy liquidity position, as indicated by the upward trend in the current ratio, quick ratio, and cash ratio over the five-year period. This suggests that the company has sufficient liquid assets to meet its short-term financial obligations and operational needs.

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Additional liquidity measure

Innospec Inc's cash conversion cycle has shown varying trends over the past five years, reflecting the efficiency with which the company manages its working capital. The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other assets into cash from sales.

From 2019 to 2023, the cash conversion cycle ranged from a low of 104.08 days to a high of 119.80 days. A lower number indicates that the company is able to convert its assets into cash more quickly, reflecting efficient working capital management. Conversely, a higher number suggests that the company takes longer to convert its assets into cash, potentially tying up capital and impacting liquidity.

In 2023, the cash conversion cycle decreased to 104.08 days from 117.27 days in 2022. This improvement suggests that Innospec Inc has become more efficient in managing its working capital, possibly by reducing inventory levels, improving accounts receivable collection, or extending accounts payable payment terms.

Overall, the trend in Innospec Inc's cash conversion cycle over the past five years indicates some fluctuations in the efficiency of working capital management. It is essential for the company to continue monitoring and optimizing its cash conversion cycle to ensure optimal liquidity and financial health.