LCI Industries (LCII)

Based on the provided data for LCI Industries, let's analyze the liquidity ratios:

1. Current Ratio:
- The current ratio indicates the company's ability to meet short-term obligations with its current assets.
- LCI Industries' current ratio has been gradually improving over the years, from 2.09 in 2020 to 2.82 in 2024. This suggests that the company's short-term liquidity position has strengthened, as it now has more than enough current assets to cover its current liabilities.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, measures the company's ability to meet short-term obligations using its most liquid assets.
- LCI Industries' quick ratio has shown some fluctuations but generally stayed low, ranging from 0.10 to 0.40. While the quick ratio is below 1, indicating that the company may have difficulty meeting its short-term obligations without relying on inventory, the increasing trend in recent years is positive.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity ratio, showing the company's ability to cover current liabilities with its cash and cash equivalents.
- LCI Industries' cash ratio has also shown a similar trend to the quick ratio, increasing from 0.10 in 2021 to 0.40 in 2024. This indicates a significant improvement in the company's ability to meet short-term obligations using only cash on hand.

In summary, LCI Industries has displayed a favorable trend in its liquidity ratios over the analyzed period. The current ratio has improved consistently, indicating a better overall liquidity position. Although the quick ratio remains below 1, the increasing trend is a positive sign, and the cash ratio has shown a significant improvement, indicating a stronger ability to meet short-term obligations with cash reserves.

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Additional liquidity measure

The cash conversion cycle (CCC) for LCI Industries has shown fluctuations over the past five years. In December 2020, the CCC stood at 86.25 days, indicating that it took the company approximately 86 days to convert its investments in inventory and other resources back into cash.

However, by December 2021, the CCC had increased to 116.63 days, suggesting a potential delay in converting assets into cash, which could impact the company's liquidity and working capital management.

In the following years, there was a slight improvement in the CCC, with values of 95.54 days in 2022, 93.22 days in 2023, and 93.96 days in 2024. Despite the fluctuations, the CCC remained above the initial level in 2020, indicating that the company may still be facing challenges in efficiently managing its cash conversion cycle.

Overall, LCI Industries should focus on optimizing its inventory turnover, accounts receivable collection, and payment practices to shorten its cash conversion cycle and enhance its cash flow efficiency.