Quanex Building Products (NX)

Quanex Building Products Corp's liquidity ratios provide valuable insights into the company's ability to meet its short-term obligations. Let's analyze the three key liquidity ratios - current ratio, quick ratio, and cash ratio - for the last five years to gauge the company's liquidity position.

Current Ratio:
The current ratio measures the company's ability to pay its short-term liabilities using its current assets. Quanex Building Products Corp's current ratio has been relatively stable over the past five years, ranging from 1.58 to 2.03. This indicates that the company has sufficient current assets to cover its short-term liabilities, with the ratio consistently above 1. A ratio above 1 suggests that the company has more than enough current assets to meet its short-term obligations.

Quick Ratio:
The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity by excluding inventory from current assets. Quanex Building Products Corp's quick ratio has shown some variability over the years, ranging from 0.99 to 1.30. Although the ratio has fluctuated, it has generally remained above 1, indicating that the company has an adequate level of liquid assets to cover its short-term liabilities without relying on inventory.

Cash Ratio:
The cash ratio measures the proportion of current liabilities that can be covered by cash and cash equivalents alone. Quanex Building Products Corp's cash ratio has shown an increasing trend over the past five years, from 0.31 to 0.52. This indicates that the company's ability to cover its short-term obligations with cash and cash equivalents has improved over time, which is a positive signal for liquidity.

Overall, based on these three liquidity ratios, Quanex Building Products Corp appears to be in a sound liquidity position. The company has maintained a healthy current ratio, indicating a strong ability to meet short-term obligations. Additionally, the increasing trend in the cash ratio further strengthens the company's ability to cover its short-term liabilities with readily available cash. However, it's important to consider industry benchmarks and other factors such as cash flow and capital expenditure requirements to gain a comprehensive understanding of the company's liquidity position.

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Additional liquidity measure

The cash conversion cycle (CCC) measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A shorter CCC indicates that the company is more efficient in managing its working capital and generating cash. Let's analyze the trend in Quanex Building Products Corp's CCC over the past five years:

1. Oct 31, 2023: 44.19
2. Oct 31, 2022: 45.15
3. Oct 31, 2021: 39.40
4. Oct 31, 2020: 28.89
5. Oct 31, 2019: 35.74

From the data, we can observe the following trends and make the following analysis:

- The CCC has been fluctuating over the years, indicating changes in the efficiency of Quanex Building Products Corp's working capital management.

- In 2023, the CCC increased slightly to 44.19 days, which could indicate a longer period between investing in inventory and receiving cash from the sales of its products.

- In 2022, the CCC was 45.15 days, indicating a slightly less efficient working capital management compared to 2023.

- In 2021, the CCC decreased to 39.40 days from the previous year, suggesting an improvement in the efficiency of Quanex Building Products Corp's cash conversion cycle.

- In 2020, there was a significant decrease in the CCC to 28.89 days, indicating a more efficient management of working capital and cash flows.

- In 2019, the CCC was 35.74 days, indicating a less efficient working capital management compared to 2020.

Overall, the trend in Quanex Building Products Corp's CCC shows some fluctuations, with both improvements and declines in the efficiency of its cash conversion cycle over the years. It is important for the company to continue monitoring and managing its working capital effectively to ensure optimal cash flow generation.