Reliance Steel & Aluminum Co (RS)

Based on the data provided, the liquidity ratios of Reliance Steel & Aluminum Co have shown some fluctuations over the years.

1. Current Ratio: The company's current ratio, which measures its ability to meet short-term obligations with its current assets, has ranged from a high of 5.66 in 2023 to a low of 3.21 in 2024. Generally, a current ratio above 1 indicates the company can cover its current liabilities with its current assets. The decreasing trend from 2020 to 2024 may indicate a potential decrease in short-term liquidity.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Reliance Steel & Aluminum Co's quick ratio varied significantly from a low of 0.26 in 2024 to a high of 1.28 in 2023. A quick ratio above 1 is usually considered healthy, indicating the company can meet its short-term obligations without relying on inventory.

3. Cash Ratio: The cash ratio, the most conservative liquidity measure, focuses solely on the company's ability to meet short-term liabilities with cash and cash equivalents. The company's cash ratio also showed fluctuations, ranging from 0.26 in 2024 to 1.28 in 2023. A cash ratio of 1 or higher signifies the company can pay off its current liabilities using only cash on hand.

Overall, while the current ratio suggests the company has a comfortable margin to cover its short-term obligations with its current assets, the quick and cash ratios indicate more caution due to the exclusion of inventory. It would be essential for Reliance Steel & Aluminum Co to monitor these ratios closely to ensure sufficient liquidity to navigate any potential short-term financial challenges.

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Additional liquidity measure

The cash conversion cycle of Reliance Steel & Aluminum Co has demonstrated a positive trend from 2020 to 2022, decreasing from 85.88 days to 61.86 days. This indicates improvements in the company's efficiency in converting its investments in raw materials and production into cash. However, in 2023 and 2024, the cash conversion cycle increased slightly to 71.00 days and 76.04 days, respectively.

Overall, the company has effectively managed its working capital cycle, ensuring a quicker conversion of inventory into sales and subsequent cash inflows. Despite the slight increase in 2023 and 2024, Reliance Steel & Aluminum Co's cash conversion cycle remains relatively stable, indicating a balanced approach to managing its operations and liquidity.