Nordson Corporation (NDSN)

The liquidity ratios of Nordson Corp. provide insights into the company's ability to meet its short-term obligations and manage its current liabilities effectively.

The current ratio, which measures the company's ability to meet short-term obligations using its current assets, shows a fluctuating trend over the past five years. In 2023, the ratio improved significantly to 2.11, indicating that Nordson Corp. had $2.11 in current assets for every $1 in current liabilities. This increase suggests a strengthened ability to cover short-term liabilities compared to the previous year, when the ratio was 1.36.

The quick ratio, which provides a more conservative measure of liquidity by excluding inventory from current assets, also reflects an improving trend. In 2023, the quick ratio increased to 1.33, indicating that the company had $1.33 in liquid assets available to cover each $1 of current liabilities. This improvement from the previous year’s ratio of 0.90 suggests enhanced short-term liquidity and the ability to meet obligations without relying on inventory.

The cash ratio, which measures the proportion of current liabilities that can be covered by cash and cash equivalents, shows a fluctuating pattern over the years. In 2023, the cash ratio stood at 0.32, indicating that the company had $0.32 in cash and cash equivalents for every $1 of current liabilities. Although this represents an improvement from the previous year, the ratio remains relatively low, indicating potential concerns regarding the company's ability to cover short-term obligations solely with cash.

Overall, Nordson Corp.'s liquidity ratios demonstrate varying levels of short-term solvency over the years, with the current and quick ratios improving in 2023. However, the cash ratio indicates that the company may have a limited ability to cover immediate liabilities with cash and cash equivalents alone. This suggests that Nordson Corp. may need to closely monitor its cash position to ensure it can meet its short-term obligations effectively.

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Additional liquidity measure

The cash conversion cycle for Nordson Corp. has shown fluctuations over the past five years. In the most recent period ending on October 31, 2023, the cash conversion cycle increased to 187.75 days, compared to 164.83 days in the previous year. This indicates that the company took longer to convert its investments in inventory and accounts receivable into cash during this period.

In comparison to earlier years, there has been a general trend of increasing cash conversion cycle from 2019 to 2023, with a peak in 2023. This suggests that Nordson Corp. may be facing challenges in managing its inventory and receivables efficiently, which could be leading to a longer cycle for the conversion of these assets into cash.

A longer cash conversion cycle can tie up working capital and potentially lead to increased financing costs. It may also indicate inefficiencies in the company's supply chain management and accounts receivable collection processes. Nordson Corp. should closely examine the underlying reasons for the prolonged cycle and consider implementing strategies to improve its working capital management and overall operational efficiency.