Stepan Company (SCL)

Stepping Company's liquidity ratios have been showing a declining trend over the past five years. The current ratio, which measures the firm's ability to cover its short-term obligations with its current assets, has decreased from 2.17 in 2020 to 1.21 in 2024. This suggests that the company may be facing challenges in meeting its short-term debt obligations.

Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also shown a significant decrease from 0.91 in 2020 to 0.15 in 2024. This indicates that Stepan Company may be struggling to meet its immediate payment needs without relying on selling inventory.

Furthermore, the cash ratio, which represents the proportion of current liabilities that could be covered by cash and cash equivalents, has followed the downward trend, decreasing from 0.91 in 2020 to 0.15 in 2024. This declining cash ratio suggests that the company's ability to pay off its short-term obligations solely with cash has weakened over the years.

Overall, the decreasing trend in the liquidity ratios of Stepan Company raises concerns about its short-term financial health and ability to meet its current obligations. Management may need to closely monitor its cash flows and working capital management to improve liquidity in the future.

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Additional liquidity measure

The cash conversion cycle of Stepan Company has shown fluctuations over the past five years. In 2020, the company had a cash conversion cycle of 53.73 days, which increased to 57.19 days in 2021. The cycle further extended to 62.62 days in 2022 before decreasing to 47.32 days in 2023. However, in 2024, the cycle rose again to 55.23 days.

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A shorter cash conversion cycle indicates the company is able to efficiently manage its working capital and convert inventory into cash quickly.

Stepan Company's cycle fluctuating over the years suggests potential changes in its inventory management, accounts receivable collection, and accounts payable strategies. Overall, monitoring and potentially improving the cash conversion cycle can help the company enhance its liquidity and operational efficiency.