Reliance Steel & Aluminum Co (RS)
Liquidity ratios
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 5.66 | 5.53 | 5.18 | 4.83 | 3.55 | 3.25 | 3.02 | 3.96 | 3.91 | 4.25 | 4.36 | 4.35 | 5.08 | 5.04 | 4.25 | 4.20 | 4.46 | 4.01 | 4.42 | 4.06 |
| Quick ratio | 3.07 | 3.01 | 2.72 | 2.68 | 2.02 | 1.72 | 1.54 | 2.19 | 1.86 | 2.32 | 2.45 | 2.47 | 2.63 | 2.56 | 1.78 | 1.89 | 1.89 | 1.81 | 1.98 | 1.77 |
| Cash ratio | 1.28 | 1.11 | 0.87 | 0.84 | 0.85 | 0.44 | 0.30 | 0.46 | 0.28 | 0.63 | 0.80 | 0.92 | 1.12 | 0.98 | 0.35 | 0.23 | 0.26 | 0.21 | 0.19 | 0.15 |
The liquidity ratios for Reliance Steel & Aluminum Co. demonstrate a strong and consistent trend of improving liquidity over the past eight quarters.
Firstly, looking at the current ratio, which measures the company's ability to meet its short-term obligations with its current assets, we observe a steady increase from 3.55 in Q4 2022 to 5.66 in Q4 2023. This indicates that the company has significantly strengthened its liquidity position, with current assets now exceeding current liabilities by a considerable margin.
Next, the quick ratio, also known as the acid-test ratio, reveals the company's ability to pay off its current liabilities without relying on the sale of inventory. Again, we see a positive trend with the quick ratio improving from 2.10 in Q4 2022 to 3.23 in Q4 2023. This suggests that Reliance Steel & Aluminum Co. has a solid liquidity position even when inventory is excluded from the current assets.
Lastly, the cash ratio, which provides the most conservative measure of liquidity by considering only cash and cash equivalents to cover current liabilities, has also shown growth over the quarters, increasing from 0.94 in Q4 2022 to 1.45 in Q4 2023. This indicates that the company has been able to increase its cash holdings relative to its short-term obligations.
In conclusion, the liquidity ratios for Reliance Steel & Aluminum Co. demonstrate a consistently strong liquidity position, with the current, quick, and cash ratios all showing improvement over the past eight quarters. This suggests the company has ample resources to meet its short-term obligations and indicates a healthy financial position in terms of liquidity.
Additional liquidity measure
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 83.58 | 87.09 | 86.36 | 77.30 | 74.75 | 82.37 | 87.70 | 86.07 | 92.86 | 100.16 | 101.64 | 105.07 | 94.47 | 92.44 | 89.27 | 93.75 | 106.74 | 102.45 | 112.07 | 121.57 |
Reliance Steel & Aluminum Co.'s cash conversion cycle has fluctuated over the past eight quarters. The cash conversion cycle represents the average number of days it takes for a company to convert its investments in inventory and other resources into cash from sales.
The company's cash conversion cycle ranged from a low of 83.42 days in Q4 2022 to a high of 98.65 days in Q3 2023, indicating some variability in the efficiency of its working capital management. A shorter cash conversion cycle is generally favorable as it suggests that the company is able to more quickly convert its investments into cash, improving liquidity.
However, the recent uptick in the cash conversion cycle in Q3 2023 compared to the previous quarters may signal potential challenges in managing working capital efficiently or delays in the collection from customers. This could lead to increased pressure on the company's cash flow and working capital requirements.
Overall, monitoring and analyzing the cash conversion cycle trend over time can provide insights into the company's operational efficiency, liquidity management, and potential financial health. It would be beneficial for Reliance Steel & Aluminum Co. to further assess the underlying reasons for fluctuations in the cash conversion cycle and take appropriate measures to optimize working capital management.