Quanex Building Products (NX)

Quanex Building Products' liquidity ratios have shown variations over the past five years. The current ratio has generally improved from 1.59 in 2020 to 2.24 in 2024, indicating an increasing ability to cover short-term obligations with current assets. This suggests the company has a comfortable buffer to meet its current liabilities.

Similarly, the quick ratio has also shown fluctuations but has remained relatively stable over the years, ranging from 1.62 in 2021 to 1.88 in 2023. This metric excludes inventory from current assets, providing a more stringent measure of liquidity. The values above 1 indicate that the company can cover its short-term liabilities without relying on selling inventory.

On the other hand, the cash ratio, which measures the ability to cover current liabilities with cash and cash equivalents, has also experienced variability. The ratio decreased from 0.40 in 2020 to 0.36 in 2024, indicating a slightly reduced capacity to settle immediate obligations solely with cash on hand.

Overall, Quanex Building Products' liquidity position appears to have improved in recent years, as evidenced by the upward trend in the current and quick ratios. However, the declining cash ratio may suggest a need for the company to closely monitor its cash management strategies to ensure it can meet short-term obligations efficiently.

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Additional liquidity measure

The cash conversion cycle of Quanex Building Products has shown fluctuations over the past five years. In 2024, the cash conversion cycle increased significantly to 157.73 days, indicating that the company took longer to convert its investments in inventory back into cash from sales. This could suggest potential issues with inventory management or collection of receivables.

Comparing 2024 to 2023, there was a notable increase from 71.64 days to 157.73 days, signaling a significant deterioration in the efficiency of Quanex Building Products' working capital management. It is essential for the company to address the factors contributing to this prolonged cash conversion cycle to optimize its liquidity position.

While the cash conversion cycle in 2023 and 2022 were relatively stable at around 71-72 days, there was a slight increase to 75.73 days in 2021. However, Quanex Building Products managed to lower the cash conversion cycle to 67.96 days in 2020, indicating improved efficiency in managing cash flows and working capital.

Overall, Quanex Building Products needs to closely monitor its cash conversion cycle, particularly the trend of increasing days over the years, to ensure optimal utilization of its resources and maintain a healthy liquidity position in the future.