NewMarket Corporation (NEU)

NewMarket Corporation's liquidity ratios as of December 31 for the years 2020 to 2024 show fluctuations in its ability to meet short-term obligations and the availability of liquid assets.

1. Current Ratio: The current ratio measures the company's ability to cover its short-term liabilities with its current assets. In 2020, the company had a healthy current ratio of 2.87, indicating a strong liquidity position. However, this ratio declined to 1.91 in 2021, improved to 2.81 in 2022, and further increased to 2.85 in 2023 before decreasing to 2.75 in 2024. Overall, the current ratio has shown some volatility but has generally remained above 2, reflecting that NewMarket Corporation has adequate current assets to cover its current liabilities.

2. Quick Ratio (Acid-Test Ratio): The quick ratio measures the company's ability to meet its short-term obligations using its most liquid assets. In 2020, the quick ratio was relatively low at 0.40, indicating that a significant portion of the company's current assets was tied up in inventory. The ratio improved to 0.63 in 2021, decreased sharply to 0.16 in 2022, and dropped significantly to -0.71 in 2023, indicating potential issues with liquidity in that year. However, the ratio rebounded to 0.21 in 2024. The quick ratio's fluctuation suggests that NewMarket Corporation may have faced challenges in converting its current assets into cash quickly in some years.

3. Cash Ratio: The cash ratio provides insight into the company's ability to cover its short-term obligations with its cash and cash equivalents. The cash ratio mirrored the trend of the quick ratio, with values of 0.40 in 2020, 0.63 in 2021, 0.16 in 2022, -0.71 in 2023, and 0.21 in 2024. The negative cash ratio in 2023 suggests that the company may have faced cash shortage or mismanagement during that period. However, the recovery in 2024 indicates an improvement in the availability of cash and cash equivalents.

In conclusion, NewMarket Corporation's liquidity ratios have shown fluctuations over the years, with the current ratio remaining relatively stable above 2, indicating good overall liquidity position. However, the quick ratio and cash ratio have shown more variability, with some years indicating possible liquidity challenges. Monitoring these ratios closely can help assess the company's ability to meet its short-term obligations effectively.

---

Additional liquidity measure

The cash conversion cycle of NewMarket Corporation has shown some variation over the past five years. On December 31, 2020, the company's cash conversion cycle was 103.38 days, which decreased to 100.62 days by December 31, 2021. However, there was an increase in the cash conversion cycle to 108.49 days by December 31, 2022.

A significant improvement was seen on December 31, 2023, when the cash conversion cycle decreased sharply to 86.47 days. This indicates that the company was able to convert its investments in inventory into cash more efficiently during that period.

By December 31, 2024, the cash conversion cycle slightly increased to 97.08 days compared to the previous year. Overall, NewMarket Corporation has shown fluctuations in its cash conversion cycle, but the downward trend in 2023 suggests an improvement in managing its working capital effectively. Further analysis and comparison with industry benchmarks may provide additional insights into the company's liquidity management performance.