MGP Ingredients Inc (MGPI)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 4.51 | 4.31 | 4.13 | 4.17 | 4.69 |
| Quick ratio | 1.44 | 1.53 | 1.35 | 1.47 | 1.15 |
| Cash ratio | 0.16 | 0.45 | 0.24 | 0.41 | 0.08 |
The liquidity ratios of MGP Ingredients, Inc. indicate the company's ability to meet its short-term obligations with its current assets.
The current ratio has been consistently strong over the past five years, with values ranging from 4.13 to 4.69. This suggests that MGP Ingredients has more than enough current assets to cover its current liabilities, providing a comfortable margin of safety.
The quick ratio, which excludes inventory from current assets, has also been relatively stable, ranging from 1.36 to 1.56. This indicates that the company can cover its short-term liabilities without relying on the sale of inventory.
The cash ratio, which measures the company's ability to cover its current liabilities with only cash and cash equivalents, has fluctuated more significantly over the years. The ratio ranged from 0.14 to 0.48, with a notable drop in 2023. This implies that MGP Ingredients may have reduced cash reserves in the most recent year, potentially impacting its ability to meet short-term obligations with cash on hand.
Overall, MGP Ingredients, Inc. appears to have a strong liquidity position based on the current and quick ratios. However, the decrease in the cash ratio in 2023 warrants further investigation to understand the company's cash management practices and potential implications for its liquidity going forward.
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 219.20 | 187.91 | 197.22 | 171.29 | 166.57 |
The cash conversion cycle of MGP Ingredients, Inc. has shown fluctuations over the past five years. In 2023, the company's cash conversion cycle extended to 251.02 days, reflecting an increase compared to the previous year. This indicates that the company took longer to convert its investments in inventory and other resources into cash receipts from sales.
The trend in the cash conversion cycle over the past five years reveals some variability, as it decreased in 2022 compared to 2021 but then increased again in 2023. This fluctuation suggests potential challenges in managing working capital efficiently and optimizing the company's cash flow processes.
Overall, MGP Ingredients, Inc. should focus on streamlining its operations to reduce the cash conversion cycle, as a shorter cycle typically indicates improved liquidity and operational efficiency. Analyzing the underlying factors contributing to the fluctuations in the cash conversion cycle can provide valuable insights for the company to enhance its working capital management strategies.