Pool Corporation (POOL)

The liquidity ratios of Pool Corporation have displayed fluctuations over the past five years. The current ratio, which assesses the company's ability to cover short-term obligations with current assets, decreased from 2.99 in 2022 to 2.36 in 2023, indicating a slight decline in short-term liquidity. However, it remained above 2 in all years, reflecting a healthy liquidity position overall.

In contrast, the quick ratio, a more stringent measure of liquidity excluding inventory from current assets, also decreased from 0.63 in 2022 to 0.58 in 2023. This decline suggests a potential reduction in the company's ability to meet immediate obligations without relying on inventory, which may warrant further scrutiny.

The cash ratio, which focuses solely on the ability to cover current liabilities with cash and cash equivalents, exhibited varying levels over the years. Although it increased from 0.11 in 2022 to 0.14 in 2023, indicating a stronger cash position, it remained relatively low compared to the other liquidity ratios. This suggests that Pool Corporation may have limited cash reserves available to meet short-term obligations without relying on other current assets.

Overall, while the current ratio indicates a generally healthy liquidity position for Pool Corporation, the declining trend in the quick ratio and the relatively low levels of the cash ratio highlight areas that may require closer attention to ensure continued liquidity and financial stability.

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Additional liquidity measure

The cash conversion cycle of Pool Corporation has fluctuated over the past five years. In 2023, the company's cash conversion cycle decreased to 103.15 days from 122.56 days in 2022. This indicates that Pool Corporation is taking less time to convert its investments in inventory into cash receipts from sales.

Comparing to the prior years, the cash conversion cycle was higher in 2022 and 2021, indicating a prolonged period of time to convert inventory into cash. However, the company managed to improve its efficiency in cash conversion in 2023 relative to these years.

In 2020 and 2019, although the cash conversion cycle was lower than in 2022 and 2021, Pool Corporation saw a slight increase in the cycle length in 2020 compared to 2019. This suggests some challenges in managing inventory, accounts receivable, and accounts payable during that period.

Overall, the decreasing trend in the cash conversion cycle from 2022 to 2023 is a positive sign, showing that Pool Corporation is becoming more efficient in managing its working capital and improving its liquidity position. Monitoring this trend over time will be important to assess the company's effectiveness in managing its cash flow and operations.