Kadant Inc (KAI)

Based on the liquidity ratios of Kadant Inc over the past five years, there are some notable trends to consider. The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has shown some fluctuations but generally stayed above the industry benchmark of 1. A higher current ratio indicates a stronger short-term liquidity position.

The quick ratio, also known as the acid-test ratio, reflects the firm's ability to meet its short-term liabilities with its most liquid assets. Kadant Inc's quick ratio has varied significantly over the years, sometimes falling below 1, which may signal potential difficulty in fulfilling immediate obligations without relying on inventory sales.

The cash ratio, which is the most conservative liquidity metric as it only considers cash and cash equivalents, portrays how well the company can cover its current liabilities without relying on inventory or receivables. Kadant Inc's cash ratio has shown volatility, with the ratio spiking in 2023 but fluctuating in other years, indicating varying levels of liquidity risk.

Overall, while Kadant Inc has generally maintained a healthy liquidity position based on the current ratio, the fluctuations in the quick ratio and cash ratio suggest potential challenges in managing short-term liquidity effectively. Further analysis and monitoring of liquidity trends are warranted to ensure the company's financial stability and ability to meet its obligations in the short term.

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Additional liquidity measure

The cash conversion cycle of Kadant Inc has shown fluctuations over the past five years. As of December 31, 2020, the company's cash conversion cycle was 101.62 days, indicating the number of days it takes for the company to convert its investments in inventory and other resources into cash inflows from sales.

Over the following years, Kadant Inc managed to decrease its cash conversion cycle to 94.75 days by December 31, 2021, showing an improvement in efficiency in managing its working capital. However, in the subsequent years, the cycle increased to 103.56 days by December 31, 2022, and then slightly decreased to 102.00 days by December 31, 2023.

It is essential to note that by December 31, 2024, Kadant Inc had made a significant improvement in its cash conversion cycle, achieving a cycle of 88.13 days. This suggests that the company became more effective in managing its operational and financial activities to generate cash inflows at a faster rate relative to the investment in resources.

Overall, although there have been fluctuations in Kadant Inc's cash conversion cycle over the years, the noticeable improvement by the end of 2024 indicates a positive trend towards better working capital management and operational efficiency.