Inter Parfums Inc (IPAR)

Cash ratio

Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Cash and cash equivalents US$ in thousands 125,433 88,462 104,713 159,613 169,681
Short-term investments US$ in thousands 109,311 94,304 150,833 160,014 126,627
Total current liabilities US$ in thousands 332,427 324,745 344,567 244,910 156,205
Cash ratio 0.71 0.56 0.74 1.31 1.90

December 31, 2024 calculation

Cash ratio = (Cash and cash equivalents + Short-term investments) ÷ Total current liabilities
= ($125,433K + $109,311K) ÷ $332,427K
= 0.71

The cash ratio, calculated as the ratio of cash and cash equivalents to current liabilities, provides insight into a company's ability to cover its short-term obligations using its cash reserves.

For Inter Parfums Inc, the cash ratio has shown a declining trend over the years:
- In December 31, 2020, the cash ratio stood at 1.90, indicating that the company had $1.90 in cash and cash equivalents for every dollar of current liabilities. This suggests a strong liquidity position.
- By December 31, 2021, the ratio decreased to 1.31, indicating some reduction in liquidity but still a healthy position.
- However, in December 31, 2022, the cash ratio dropped further to 0.74, which may raise concerns as the company now had only $0.74 in cash and cash equivalents to cover each dollar of current liabilities.
- The declining trend continued in the following years, with the ratio falling to 0.56 by December 31, 2023, and recovering slightly to 0.71 by December 31, 2024.

This trend suggests that Inter Parfums Inc's liquidity position has weakened over the years, as its cash reserves have not been keeping pace with its increasing current liabilities. It is recommended that the company closely monitors its liquidity position and explores strategies to improve its ability to meet short-term obligations without relying heavily on cash reserves.