Skyline Corporation (SKY)

The liquidity ratios of Skyline Corporation indicate its ability to meet short-term financial obligations with its current assets.

The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, shows a fluctuating trend over the years. It increased from 2.14 in March 2020 to 2.23 in March 2022, reflecting an improvement in liquidity. However, there was a significant spike to 4.19 in March 2023, indicating a large increase in current assets relative to current liabilities. By March 2024, the current ratio had decreased to 2.36, showing a stabilization of liquidity.

The quick ratio, also known as the acid-test ratio, provides a more stringent assessment of liquidity by excluding inventory from current assets. Similar to the current ratio, the quick ratio demonstrates fluctuations over the years. It rose from 1.37 in March 2020 to 1.50 in March 2022, indicating an improvement in the company's ability to meet short-term obligations without relying on inventory. The quick ratio peaked at 3.27 in March 2023, signifying a strong liquidity position, before declining to 1.44 in March 2024.

The cash ratio, which is the most conservative measure of liquidity, focuses solely on cash and cash equivalents to cover current liabilities. Like the other liquidity ratios, the cash ratio displays variability over the years. It increased from 1.12 in March 2020 to 1.24 in March 2022, indicating a strengthening liquidity position. The cash ratio reached its highest point at 3.00 in March 2023, highlighting the company's significant cash reserves in relation to current liabilities. By March 2024, the cash ratio had slightly decreased to 1.27.

Overall, the variations in Skyline Corporation's liquidity ratios suggest fluctuations in its ability to meet short-term obligations. The company experienced improvements in liquidity in certain periods, as seen in the higher current, quick, and cash ratios, although there were also fluctuations observed in subsequent years. It will be crucial for the company to maintain a balance between current assets and liabilities to ensure continued financial stability and meet its short-term obligations effectively.

---

Additional liquidity measure

The cash conversion cycle for Skyline Corporation has shown fluctuation over the past five years. It was 37.02 days as of March 31, 2020, increased to 44.96 days by March 31, 2021, slightly decreased to 43.93 days by March 31, 2022, improved to 36.83 days as of March 31, 2023, and then significantly increased to 64.24 days by March 31, 2024.

The cash conversion cycle represents the number of days it takes for a company to convert its investments in inventory into cash flows from sales. A shorter cash conversion cycle is generally preferred as it indicates that the company is efficiently managing its working capital.

The fluctuation in Skyline Corporation's cash conversion cycle can be indicative of changes in its inventory management, accounts receivable collection, and accounts payable processes. A decreasing trend in the cash conversion cycle suggests improved efficiency and liquidity, while an increasing trend may signify potential issues in working capital management or changes in business operations.

Analyzing the reasons behind these fluctuations in the cash conversion cycle may provide insights into the company's overall financial health and operational efficiency. Companies often aim to optimize their cash conversion cycles to maintain liquidity and maximize profitability.