Sonic Automotive Inc (SAH)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.10 | 1.20 | 1.10 | 1.03 | 0.98 |
| Quick ratio | 0.24 | 0.52 | 0.42 | 0.30 | 0.22 |
| Cash ratio | 0.01 | 0.27 | 0.21 | 0.09 | 0.01 |
Sonic Automotive, Inc.'s liquidity ratios indicate the company's ability to meet its short-term obligations effectively. Looking at the current ratio, we observe a slight decrease from 1.20 in 2022 to 1.10 in 2023. Although the current ratio remains above 1 in all years, suggesting the company can cover its current liabilities with current assets, the slight downward trend may warrant attention.
Analyzing the quick ratio, which excludes inventory from current assets, we note a decrease from 0.54 in 2022 to 0.41 in 2023. This decrease may indicate a potential challenge for Sonic Automotive in meeting its short-term obligations without relying on inventory liquidity.
The cash ratio, reflecting the most conservative measure of liquidity by considering only cash and cash equivalents, shows a similar downward trend. The cash ratio has decreased from 0.29 in 2022 to 0.18 in 2023. While the company's cash ratio indicates a higher level of liquidity compared to the quick ratio, the decreasing trend may require close monitoring to ensure the company can meet its obligations when due.
Overall, Sonic Automotive's liquidity ratios suggest a need for potential improvements in managing short-term liquidity challenges, particularly with regards to quick assets such as cash and marketable securities. Monitoring and enhancing liquidity management strategies may be beneficial to ensure the company's financial health and ability to meet its short-term obligations effectively.
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 50.92 | 40.89 | 46.57 | 56.78 | 71.60 |
The cash conversion cycle for Sonic Automotive, Inc. has fluctuated over the past five years. In 2023, the company exhibited an increase in its cash conversion cycle to 56.41 days compared to 45.75 days in 2022. This indicates that it took Sonic Automotive, Inc. longer to convert its investments in inventory and accounts receivable into cash during 2023.
Although the cash conversion cycle decreased in 2022 from 2021, it increased in 2021 compared to 2020. This fluctuation suggests potential variability in the company's efficiency in managing its working capital over the years.
Overall, the trend in Sonic Automotive, Inc.'s cash conversion cycle shows some volatility, with improvements in certain years and deteriorations in others. Further analysis and investigation into the company's operational and financial strategies may help in understanding the underlying reasons behind these fluctuations and in identifying potential areas for improvement in managing its working capital efficiently.