Leggett & Platt Incorporated (LEG)

The current ratio for Leggett & Platt Incorporated has shown fluctuations over the years, ranging from a low of 1.48 in September 30, 2021, to a high of 2.08 in March 31, 2020 and also in March 31, 2023. This ratio measures the company's ability to meet its short-term obligations with its current assets. A ratio above 1 indicates that the company has more current assets than current liabilities, with a higher ratio suggesting stronger liquidity.

The quick ratio, which excludes inventory from current assets, has varied between 0.18 (September 30, 2021) and 0.41 (December 31, 2024). This ratio provides a more stringent test of liquidity as it considers only the most liquid assets that can be quickly converted to cash to meet short-term obligations. A quick ratio above 1 is generally considered healthy, although it ultimately depends on the industry.

The cash ratio, which is the most conservative liquidity measure as it only considers cash and cash equivalents, has also shown fluctuations for Leggett & Platt Incorporated. The ratio ranged from 0.18 (September 30, 2021) to 0.41 (December 31, 2024). A higher cash ratio indicates a company has a larger proportion of cash to cover its short-term liabilities, providing a strong safety cushion in case of financial difficulties.

Overall, the company's liquidity ratios indicate that it has generally been able to maintain a level of liquidity to meet its short-term obligations, with some fluctuations in the quick and cash ratios that may warrant further investigation depending on the business environment and industry conditions.

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Additional liquidity measure

The cash conversion cycle is a crucial metric for assessing how efficiently a company manages its working capital. Leggett & Platt Incorporated's cash conversion cycle has exhibited fluctuations over the analyzed period.

From March 31, 2020, to December 31, 2024, the cash conversion cycle ranged from a low of 62.41 days to a high of 91.19 days. A lower cash conversion cycle is generally preferable as it indicates the company is able to convert its inventory and receivables into cash more quickly.

In the initial period, the company started with a relatively low cash conversion cycle, indicating efficient working capital management. However, as of March 31, 2021, there was a notable increase in the cycle to 84.43 days, peaking at 91.19 days on March 31, 2022. This prolonged cycle could suggest potential inefficiencies in the company's operations, such as slower inventory turnover or collection of receivables.

Following this peak, Leggett & Platt Incorporated made improvements in its cash conversion cycle, gradually reducing the number of days required to convert its investments in inventory and accounts receivable into cash. By December 31, 2024, the cash conversion cycle had decreased to 72.33 days, indicating enhanced efficiency in working capital management.

Overall, it is essential for Leggett & Platt Incorporated to continue monitoring and improving its cash conversion cycle to ensure optimal utilization of resources and maintain healthy liquidity levels.