ScanSource Inc (SCSC)

ScanSource Inc's liquidity ratios have shown varying trends over the past five years.

The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has generally been above 1, indicating that the company has sufficient current assets to cover its current liabilities. The current ratio increased from 1.67 in 2020 to 2.10 in 2024, showing an improving liquidity position over the years.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. ScanSource Inc's quick ratio has fluctuated but generally improved from 0.74 in 2020 to 1.28 in 2024. This indicates that the company has a better ability to meet its short-term obligations using its most liquid assets.

The cash ratio, which is the most conservative liquidity metric, measures the company's ability to cover its current liabilities with only cash and cash equivalents. ScanSource Inc's cash ratio has varied significantly over the years, but has generally increased from 0.04 in 2020 to 0.28 in 2024. This shows an enhancement in the company's ability to meet its short-term obligations solely with cash on hand.

Overall, the increasing trends in the current ratio, quick ratio, and cash ratio reflect an improved liquidity position for ScanSource Inc over the past five years, indicating that the company has become better equipped to handle its short-term financial obligations.

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Additional liquidity measure

The cash conversion cycle for ScanSource Inc has shown some fluctuations over the past five years. In the fiscal year ending June 30, 2024, the company's cash conversion cycle was 66.29 days, representing an improvement from the previous year's cycle of 86.68 days. This indicates that ScanSource has become more efficient in converting its investments in inventory and accounts receivable into cash during the most recent fiscal year.

Looking back at the trend over the past five years, we can observe that the cash conversion cycle was relatively lower in the fiscal years ending June 30, 2021 and June 30, 2020, at 55.11 days and 60.14 days, respectively. This suggests a historically better performance in managing its cash conversion cycle during those periods.

On the other hand, the cash conversion cycle was notably higher in the fiscal year ending June 30, 2023, at 86.68 days, which could have been a signal of potential inefficiencies in managing the company's cash flow and working capital during that period.

In essence, ScanSource Inc has shown some variability in its cash conversion cycle over the past five years, with the most recent year demonstrating improved efficiency. It is crucial for the company to continue monitoring and managing its working capital effectively to optimize its cash conversion cycle and maintain a healthy financial position.