Lithia Motors Inc (LAD)
Liquidity ratios
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 1.41 | 1.33 | 1.36 | 1.30 | 1.46 | 1.66 | 1.59 | 1.38 | 1.38 | 1.41 | 1.49 | 1.26 | 1.35 | 1.24 | 1.20 | 1.20 | 1.20 | 1.18 | 1.16 | 1.17 |
| Quick ratio | 0.42 | 0.29 | 0.28 | 0.30 | 0.34 | 0.42 | 0.40 | 0.37 | 0.44 | 0.44 | 0.61 | 0.35 | 0.31 | 0.26 | 0.28 | 0.15 | 0.25 | 0.20 | 0.20 | 0.21 |
| Cash ratio | 0.20 | 0.07 | 0.06 | 0.08 | 0.09 | 0.06 | 0.02 | 0.05 | 0.06 | 0.06 | 0.30 | 0.07 | 0.06 | 0.03 | 0.06 | 0.02 | 0.06 | 0.01 | 0.02 | 0.02 |
Lithia Motors, Inc.'s liquidity ratios provide insights into the company's ability to meet its short-term financial obligations.
1. Current ratio:
The current ratio measures the company's ability to cover its short-term liabilities with its short-term assets. A higher current ratio is generally desirable as it indicates a stronger liquidity position. In the most recent quarter, Q4 2023, Lithia Motors had a current ratio of 1.41, showing that it had $1.41 in current assets for every $1 in current liabilities. The current ratio has been fluctuating over the quarters, with a peak in Q3 2022 at 1.66 and a low of 1.30 in Q1 2023. Overall, the current ratio seems to be above 1, indicating that Lithia Motors has generally been able to meet its short-term obligations with its current assets.
2. Quick ratio:
The quick ratio is a more stringent measure of liquidity as it excludes inventories from current assets. A quick ratio below 1 may indicate potential difficulties in meeting immediate obligations. Lithia Motors' quick ratio has been fluctuating, with the most recent value in Q4 2023 at 0.45. This suggests that the company had $0.45 in liquid assets available to cover $1 of current liabilities. The quick ratio has shown some volatility, reaching a high of 0.49 in Q3 2022 and a low of 0.30 in Q2 and Q3 2023. The current quick ratio indicates that the company may have some challenges in meeting its short-term obligations without relying on inventory conversion.
3. Cash ratio:
The cash ratio is the most conservative measure of liquidity, focusing solely on cash and cash equivalents to cover current liabilities. Lithia Motors' cash ratio has also been fluctuating, with the Q4 2023 value at 0.22. This signifies that the company had $0.22 in cash and cash equivalents for every $1 of current liabilities. The cash ratio has shown some variability over the quarters, with a peak in Q4 2022 at 0.13 and a low in Q1 2023 at 0.08. The trend in the cash ratio indicates that the company may have limited cash reserves relative to its short-term obligations, which could pose liquidity challenges in the future.
In summary, while Lithia Motors has maintained current ratios above 1, indicating general short-term solvency, the quick and cash ratios suggest that the company may have limitations in quickly covering its liabilities with available liquid assets. Monitoring these ratios over time can provide valuable insights into the company's liquidity management and financial health.
Additional liquidity measure
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 68.87 | 64.41 | 63.81 | 59.31 | 54.37 | 57.29 | 54.20 | 51.65 | 51.66 | 48.30 | 59.52 | 74.76 | 85.70 | 97.90 | 88.95 | 114.86 | 120.58 | 92.25 | 96.43 | 98.07 |
The cash conversion cycle for Lithia Motors, Inc. has shown some variability over the past eight quarters. In Q4 2023, the company's cash conversion cycle was 76.35 days, which was an increase from the previous quarter's 71.54 days. This indicates that the company took longer to convert its investments in inventory into cash during this period.
Comparing the most recent data to the same period a year ago, there has been a noticeable upward trend in the cash conversion cycle. In Q4 2022, the cash conversion cycle was significantly lower at 60.46 days, indicating that the firm was more efficient in managing its working capital a year ago.
Overall, the cash conversion cycle has been fluctuating within a range of 57.04 days to 76.35 days over the past eight quarters. It would be important for stakeholders to closely monitor this metric to ensure the company is effectively managing its inventory, accounts receivable, and accounts payable to optimize cash flow efficiency.