Leggett & Platt Incorporated (LEG)

Leggett & Platt, Inc.'s liquidity ratios show a fluctuating trend over the past five years.

The current ratio measures the company's ability to cover its short-term obligations with its current assets. A higher current ratio is generally considered favorable, indicating a stronger ability to pay off short-term liabilities. Leggett & Platt's current ratio has decreased from 1.66 in 2019 to 1.49 in 2023. While the current ratio of 1.49 as of December 31, 2023, indicates that the company still has more current assets than current liabilities, the downward trend over the period raises concerns about the company's liquidity position.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. Leggett & Platt's quick ratio has also experienced a decline from 0.97 in 2019 to 0.84 in 2023. A quick ratio below 1 suggests that the company may have difficulty meeting its short-term obligations without relying on selling inventory or obtaining additional financing.

The cash ratio, which is the most conservative measure of liquidity, focuses solely on the company's ability to cover its current liabilities with cash and cash equivalents. Leggett & Platt's cash ratio has fluctuated over the years, with a decrease from 0.40 in 2020 to 0.34 in 2023. A cash ratio below 1 indicates that the company may not have sufficient cash on hand to meet its short-term obligations without relying on other current assets.

Overall, the declining trend in these liquidity ratios raises concerns about Leggett & Platt, Inc.'s ability to meet its short-term financial obligations without facing liquidity issues. It may be important for the company to closely monitor its liquidity position and consider strategies to improve its short-term financial health.

---

Additional liquidity measure

The cash conversion cycle of Leggett & Platt, Inc. has fluctuated over the past five years, ranging from 58.12 days in 2020 to 81.93 days in 2022. The cash conversion cycle measures the company's efficiency in managing its working capital, reflecting how quickly it can convert its inventory and accounts receivable into cash and pay off its accounts payable.

In 2023, the cash conversion cycle improved to 75.96 days compared to the previous year. This indicates that the company was able to optimize its working capital management by reducing the time it takes to convert its resources into cash.

Analyzing the trend over the five-year period, we can see that the cash conversion cycle increased in 2022 and 2021 compared to the previous years, suggesting potential challenges in managing working capital efficiency during those periods. However, the decrease in the cycle in 2023 is a positive sign of improvement in the company's operational efficiency.

Overall, monitoring the cash conversion cycle is crucial for assessing how effectively Leggett & Platt, Inc. is managing its working capital and generating cash flow from its operational activities. The company should continue to focus on optimizing its inventory turnover, accounts receivable collection, and accounts payable management to further enhance its cash conversion cycle efficiency.