Inter Parfums Inc (IPAR)

Interpreting Inter Parfums, Inc.'s liquidity ratios reveals fluctuations in the company's ability to meet short-term financial obligations over the past five years.

The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has shown a decreasing trend from 2019 to 2023. While the ratio was relatively high in 2020, at 3.85, it has steadily declined to 2.58 in 2023. This may indicate a potential decrease in the company's liquidity and ability to pay its short-term obligations.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Inter Parfums, Inc.'s quick ratio has remained stable at around 1.44 in the last three years. This suggests that the company has a consistent ability to meet its short-term obligations without relying heavily on inventory.

The cash ratio, which is the most conservative liquidity measure, reflects the company's ability to cover its current liabilities using only cash and cash equivalents. Inter Parfums, Inc.'s cash ratio has fluctuated over the years, with a downward trend from 2019 to 2023. The ratio dropped from 2.01 in 2019 to 0.65 in 2023, indicating a potential decrease in the company's cash reserves relative to its current liabilities.

Overall, while the current and cash ratios indicate some decline in liquidity over the years, the stable quick ratio suggests that Inter Parfums, Inc. has maintained a consistent ability to meet its short-term obligations without relying on inventory. However, the declining trends in some ratios may warrant further investigation to understand the underlying reasons for the changes in liquidity.

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Additional liquidity measure

Inter Parfums, Inc.'s cash conversion cycle has shown variability over the past five years. The company's cash conversion cycle for the year ended December 31, 2023, increased to 279.93 days from 263.69 days in 2022. This indicates that it took Inter Parfums longer to convert its investment in inventory into cash receipts from customers and subsequently pay its suppliers compared to the previous year.

In 2021, the cash conversion cycle improved significantly to 202.76 days, reflecting more efficient management of working capital. However, there was a spike in the cycle in 2020 to 303.12 days, suggesting potential challenges managing inventory, receivables, and payables efficiently during that period.

Overall, the trend in Inter Parfums' cash conversion cycle shows some fluctuations, with a general improvement in 2021, followed by a deterioration in 2023. This highlights the importance of closely monitoring working capital management to ensure optimal cash flow efficiency in the company's operations.