JM Smucker Company (SJM)

Liquidity ratios provide insights into a company's ability to meet short-term obligations with its current assets. Examining JM Smucker Company's liquidity ratios over the last five years reveals fluctuating trends in its liquidity position.

The current ratio, which measures the company's ability to cover short-term liabilities with current assets, has varied significantly. It decreased from 1.24 in 2020 to 0.52 in 2024, indicating a potential decline in the company's ability to meet short-term obligations through readily available assets.

The quick ratio, a more stringent measure of liquidity that excludes inventories from current assets, also shows a fluctuating pattern. It declined from 0.59 in 2020 to 0.21 in 2024, suggesting a potential decrease in the company's ability to cover immediate liabilities without relying on inventory.

The cash ratio, which focuses solely on the most liquid assets (cash and cash equivalents) relative to current liabilities, indicates a similar trend. It dropped from 0.25 in 2020 to 0.02 in 2024, implying a reduced capacity to pay off short-term obligations with cash reserves.

Overall, the declining trend in the liquidity ratios of JM Smucker Company raises concerns about its short-term financial stability and ability to cover immediate obligations. It may indicate a need for the company to manage its liquidity more effectively to avoid potential liquidity problems in the future.

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Additional liquidity measure

The cash conversion cycle of JM Smucker Company has fluctuated over the past five years. In the most recent year, ending on April 30, 2024, the company's cash conversion cycle was 17.01 days, showing an increase from the previous year's 6.72 days. This indicates that it took JM Smucker Company longer to convert its investments in inventory and accounts receivable into cash during the most recent fiscal year.

Comparing the data to previous years, it is evident that the company experienced a significant reduction in its cash conversion cycle in the fiscal year ending April 30, 2023, where it stood at 6.72 days. This was a sharp improvement from the cycle of 18.36 days in the prior year ending April 30, 2022. The cycle had shown a decreasing trend from the year ending April 30, 2020, where it was at 32.20 days.

Overall, JM Smucker Company's cash conversion cycle has shown variability in recent years, with fluctuations indicating changes in the efficiency of its working capital management. The company may need to focus on strategies to optimize its inventory and accounts receivable processes to improve its cash conversion cycle in the future.