Patrick Industries Inc (PATK)

The liquidity ratios of Patrick Industries, Inc. indicate the company's ability to meet its short-term financial obligations effectively.

1. Current Ratio:
- The current ratio measures the company's ability to pay off its current liabilities with its current assets.
- The trend shows that the current ratio has been relatively stable over the past five years, ranging from 2.25 to 2.76.
- A current ratio above 1 indicates that Patrick Industries, Inc. has more current assets than current liabilities, which suggests a good ability to cover short-term obligations.

2. Quick Ratio:
- The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets.
- The trend shows some fluctuation in the quick ratio, with values ranging from 0.66 to 1.41 over the past five years.
- A quick ratio below 1 may indicate a potential difficulty in meeting short-term obligations without relying on selling inventory.

3. Cash Ratio:
- The cash ratio measures the company's ability to cover its current liabilities with its cash and cash equivalents.
- The trend in the cash ratio indicates a significant decrease from 0.86 in 2019 to 0.17 in 2023.
- A lower cash ratio implies that a smaller portion of current liabilities can be covered by the company's cash on hand, which may raise concerns about liquidity management.

In summary, while the current ratio of Patrick Industries, Inc. remains above 1, indicating a healthy liquidity position, the decreasing trend in the quick and cash ratios may suggest potential liquidity challenges in covering short-term obligations, particularly without relying on inventory or non-cash assets. It is important for the company to closely monitor its liquidity position and ensure appropriate management of current assets to meet upcoming financial obligations.

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Additional liquidity measure

Patrick Industries, Inc.'s cash conversion cycle has been gradually increasing over the past five years, indicating a potential inefficiency in managing its cash flows. The company took longer to convert its investments in inventory and receivables into cash in recent years.

In 2019, the cash conversion cycle was 46.14 days, showing a relatively efficient operation. However, since then, the cycle has been steadily increasing, reaching 68.45 days at the end of 2023. This trend suggests that Patrick Industries may be facing challenges in managing its inventory levels, collecting receivables, or optimizing its payment terms with suppliers.

A longer cash conversion cycle can tie up working capital and reduce the company's liquidity, potentially impacting its ability to meet short-term obligations or invest in growth opportunities. It is essential for Patrick Industries to closely monitor and address the factors contributing to the prolonged cash conversion cycle to improve operational efficiency and financial performance.