Ingevity Corp (NGVT)

The liquidity ratios of Ingevity Corp have fluctuated over the past five years.

The current ratio, which measures the firm's ability to cover its short-term liabilities with its current assets, has decreased from 2.24 in 2022 to 1.81 in 2023. Although the current ratio remains above 1, indicating that the company has more than enough current assets to cover its short-term obligations, the declining trend suggests potential issues regarding liquidity management.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Ingevity Corp's quick ratio has decreased from 1.13 in 2022 to 0.96 in 2023, indicating a lower ability to cover its short-term liabilities with its most liquid assets. A quick ratio below 1 may raise concerns about the company's ability to meet its immediate financial obligations.

The cash ratio, which is the most conservative liquidity measure, evaluates the firm's ability to cover its current liabilities with its cash and cash equivalents. Ingevity Corp's cash ratio has increased from 0.39 in 2022 to 0.46 in 2023. While the cash ratio has improved, it remains below 1, suggesting that the company may have insufficient cash reserves to meet its short-term obligations without relying on other current assets.

In summary, Ingevity Corp's liquidity ratios have shown a mixed performance, with a decline in the current and quick ratios and an improvement in the cash ratio. Continued monitoring of these ratios is advisable to assess the company's ability to maintain liquidity and meet its financial obligations in the near term.

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Additional liquidity measure

Ingevity Corp's cash conversion cycle has shown fluctuations over the past five years. The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A shorter cash conversion cycle is generally favorable, indicating efficient management of inventory and timely collection of receivables.

From 2019 to 2023, Ingevity Corp's cash conversion cycle varied, starting at 93.39 days in 2019, decreasing to 85.66 days in 2020, increasing to 90.35 days in 2021, jumping to 102.43 days in 2022, and then decreasing to 84.25 days in 2023.

The improvement in the cash conversion cycle from 2022 to 2023 suggests that Ingevity Corp has become more efficient in managing its working capital, converting inventory and receivables into cash more quickly. However, the company should continue to monitor and manage its cash conversion cycle effectively to ensure that it remains at optimal levels for improved liquidity and financial health.