Sonic Automotive Inc (SAH)

Sonic Automotive Inc's liquidity ratios indicate the company's ability to meet its short-term obligations effectively. The current ratio has been on a generally upward trend over the past five years, starting at 1.03 in 2020 and reaching 1.09 in 2024. This suggests that the company's current assets are slightly more than its current liabilities, providing a sufficient cushion to cover short-term obligations.

In terms of the quick ratio, Sonic Automotive Inc has shown fluctuations over the same period. The ratio started at a low of 0.30 in 2020, increased to 0.52 in 2022, and then declined to 0.20 in 2024. This ratio accounts for the most liquid assets to cover current liabilities quickly, and a ratio below 1 may indicate potential liquidity challenges.

The cash ratio, which measures the company's ability to cover its current liabilities with cash and cash equivalents, has also varied significantly. Sonic Automotive Inc's cash ratio increased from 0.09 in 2020 to 0.27 in 2022, but then dropped to 0.02 in 2024. This decline could suggest a potential decrease in the company's ability to pay off its short-term obligations solely with cash on hand.

Overall, while Sonic Automotive Inc's current ratio has improved over the years, the decreasing trend in the quick ratio and cash ratio in recent years might indicate a need for the company to monitor its liquidity position closely to ensure it can meet its short-term financial commitments effectively.

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Additional liquidity measure

The cash conversion cycle of Sonic Automotive Inc has shown variations over the years. As of December 31, 2020, the company's cash conversion cycle was 56.78 days, indicating the number of days it takes for the company to convert its investments in inventory and other resources into cash flows from sales.

By December 31, 2021, Sonic Automotive Inc managed to improve its cash conversion cycle to 46.57 days, suggesting more efficient working capital management. This trend continued in the following year, with the cash conversion cycle further decreasing to 40.89 days as of December 31, 2022.

However, there was a slight increase in the cash conversion cycle for Sonic Automotive Inc by December 31, 2023, reaching 50.92 days. This could imply potential challenges in managing working capital efficiently during that period.

By December 31, 2024, the company's cash conversion cycle extended to 60.08 days, showing a notable increase compared to the previous year. This longer cash conversion cycle might indicate delays in converting inventory investments into cash in that particular period.

Overall, Sonic Automotive Inc has experienced fluctuations in its cash conversion cycle over the years, reflecting varying efficiency levels in managing its working capital and operations.